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THE TRUE FUNCTION OF MONEY 

and 

THE FALSE FOUNDATION OF OUR 

BANKING SYSTEM 



By 

Frederick Raphael Burch 



ADOLPHUS PUBLISHING COMPANY 

626 New York Block, 

Seattle, Wash. 



Copyright, 1922 

By 

Frederick Raphael Birch 

All rights reserved 



r->^^t" 



CONTENTS 

Page 

Chapter I, The Mercenary Few 7 

II. Banks and the Banking System... 14 

III. The Origin of Money 22 

IV, Definitions of Money 28 

V, The Perversion of Money 40 

\T, The Fallacy of Interest 56 

VII. Condition of Labor 66 

VIII. Condition of Capital 71 

IX. Wealth and Capital 81 

X. The Money Question 95 

XI, Law and Facts 114 

XII, The Remedy 128 



389215 



PREFACE 

THE ERRONEOUS conception of the proper 
status and true function of money has led to 
its perversion, the evil result of which is so 
clearly evidenced by our present banking system. 

In this volume I undertake to prove the fol- 
lowing propositions: 

1st. Money is not a commodity. This being 
true : 

2nd. Money is no part of wealth. Hence : 

3rd. Money can never become capital. Not 
being capital : 

4th. Money has no earning power. And it 
follows : 

5th. Interest, or profit, on money is unearned. 

6th. Gold and silver, in common with lead and 
zinc, are commodities. 

7th. Money is something entirely different. 
It has no more natural connection with gold and silver 
than it has with lead and zinc. We must not confuse 
money with the commodity which may be chosen as its 
tangible vehicle. 

8th. Money is the medium of exchange and the 
measure of value ; a convenient and exact method 
of book-keeping; and only as such does it properly 
function. 

9th. Money is brought into existence by law. 

10th. A commodity cannot be created by law. 
All that a law can do is to function as a law. 



11th. No individual, nor body of individuals, 
should be permitted to own or control a function of 
law and charge others a tax for its use. 

12th. The government is the true depositary 
of the law and the proper executive of its functions. 

13th. These powers are usurped by the bankers 
and money-lenders, and the evil results of this usur- 
pation are colossal ; they will disrupt and destroy 
civilization unless a remedy be applied. 

14th. The remedy. 

— Frederick Raphael Burch. 



CHAPTER I 
THE MERCENARY FEW 

AS WE LOOK back over the pages of his- 
tory, and contemplate the many advances 
humanity has made toward intellectual and 
industrial freedom, we are inclined to congratulate 
ourselves far beyond what the facts warrant. Some 
of the most deplorable systems of the past have seem- 
ingly been eradicated, but they have been conquered 
in name only. The underlying principles of the same 
systems exist today, and are at the bottom of great 
abuses which yet obtain sanction of law and public 
approval. 

From the dawn of history it has been the bane of 
the world to have a mercenary few studiously devis- 
ing methods by which the many could be induced to 
contribute to the few the surplus of their production, 
and to keep the many in ignorance of the means by 
which it is accomplished. 

In ancient Greece the oracle was the efficient 
means whereby the few could impose on the many 
by representing that the gods had commanded thus 
and so. Rome followed with patrician control of the 
land and of the functions of government. Central 
Europe improved on this idea and evolved the feudal 
system. Later, in the eleventh century, this system 
was established in England by William, Duke of Nor- 
mandy. Under it the mercenary few regulated the 



8 The True Function of Money 

social and political relations, including the rights of 
landed property throughout the kingdom. A feudal 
proprietor was one who held his lands from another, 
on condition of certain services which he, as a vassal, 
was bound to perform for that other, as his suzerain 
or superior. This peculiar relation was established 
for the purpose of obtaining and preserving military 
strength. With the exception of the duty of military 
service to their superior, the vassals of the king practi- 
cally were invested with sovereign power within their 
own dominions, having vassals in various degrees be- 
neath them; and living in their fortified castles, often 
by means of pillage, while the peasantry were bound as 
serfs, or slaves, to the soil. 

The feudal barons being thus in control of the 
land, the people were compelled to become subservient 
to their masters. An aristocracy arose, which en- 
shrouded itself in the mystic doctrine of the divine 
right to rule ; the people were held to serve, and to 
contribute to their masters the surplus of their pro- 
duction. 

As we scan the pages which recount the growth 
of this system, and contemplate the hopeless condition 
of those serfs, we will unconsciously hail ourselves as 
thrice blessed that we. of the present day, have passed 
beyond such injustice. But, have we? 

A system founded upon such doctrine could not 
survive. Conditions became intolerable. Step by step, 
through seas of tears and rivers of blood, the people 
forced their persecutors to yield ground. The entire 
system was builded upon the ignorance and fear of the 
many and the cupidity and duplicity of the few. In 



The Mercenary Fezv 9 

France the condition of the people became unbearable. 
Death was preferable to an existence under such bur- 
dens. The storm broke and spent its fury in the 
French Revolution. Every member of the mercenary 
few, throughout the world, trembled, and the lesson 
which they learned was salient. 

Before the French Revolution had convulsed the 
v»'orld, our forefathers were sowing the seeds of lib- 
erty in the fruitful soil of the \\'estern Hemisphere. 
Realizing the palpable injustice of conditions in Eng- 
land, the founders of this Republic resolved to deny 
the hated institution of a landed aristocracy any foot- 
hold therein. X'o aristocratic titles and no hereditary 
political rights were to be allowed. The United States 
of America thus became the standard-bearer of the 
doctrine of equal rights ; and the mercenary few were 
temporarily restrained. This condition continued till 
the outbreak of our Civil War. 

It was while our country was trembling in the 
balance of national existence, that the mercenary few 
began to realize the power existing in the control of 
the nation's money. With a deliberation sublime in 
its assurance, the bankers set about the undoing of 
their country by attempting to foist an enormous debt 
upon the men at the front, and which they succeeded 
in doing in the late \\^orld War. Fortunately in the 
earlier day we had great and strong men at the head 
of affairs, and the bankers were told that their serv- 
ices were not required. Treasury notes and green- 
backs were issued, and. to the surprise of all orthodox 
political economists, they actually were money, and 
they performed all the functions of money. 



10 The True Function of Money 

This was a condition which the mercenary few 
could not tolerate. It behooved them to devise a new 
method by which they could secure and retain con- 
trol of the money. On June 3rd, 1864, the National 
Bank Act was passed. By this act the government is 
forestalled in any desire which it may have to repeat 
its former action and ignore the will of the bankers. 
Upon conforming to certain rules as to organization 
and operation of the banks, the bankers, in ef- 
fect, came into complete control of the volume of 
money permitted to circulate. This leaves them the 
masters of our temporal welfare. 

This financial body, known as bankers or finan- 
ciers, has the avowed purpose of acquiring, controll- 
ing, and loaning the nation's money for their own 
profit. The members are evidently pledged never to 
invest one dollar legitimately, but rather to hamper 
commerce incessantly by periodically hoarding the 
money, thus creating a scarcity of legal tender, which 
in turn inflates the rate of interest and demoralizes 
business. 

The money, theoretically the people's, but which, 
under the present system, is in reality all the bankers' 
and, under their domination and control, is periodically 
refused at the banks, and thereby a scarcity is created 
at the most inopportune time. This causes the grim 
visage of the torture of an earthly hell to appear within 
the horoscope of the man of business, and none but 
the banker can grant him salvation. The price of this is 
to pay the higher interest rate demanded and, besides, 
a complete disclosure of his private business aflfairs 



The Mercenary Few 11 

and of those of his friends with whom he has or had 
business relations. 

This association of bankers, or financiers, is as 
thoroughly organized as greed and selfishness can dic- 
tate. Its headquarters, we will assume, is somewhere 
in the old world, mayhap London. The affairs of the 
association in the United States are in the hands of 
able assistants whose headquarters are on Wall Street, 
New York. Every city throughout the United States 
has its subsidiary headquarters, and every town and 
hamlet, which supports a sufficient population, has its 
official agent, — its local bank. Each of these official 
agents is in the hands of its correspondent, and these 
correspondents are, in turn, in the hands of their cor- 
respondents, and so on to final convergence at head- 
quarters in Wall Street, New York. 

The association managers can push an electric 
button in Wall Street, and, instantly, every banker 
throughout the land, if he be in good standing, will 
feel the thrill of the contact. With the system thus 
organized, we will follow the career of the producer 
of today. He finds his existence one of unrequited 
toil and of hopeless labor for his daily bread. He 
resolves upon the only expedient by which to extricate 
himself. Taking his small means, he boldly enters 
business, that arena of fierce competition, to do battle 
against fearful odds. He soon learns that the scarcity 
of money, and the profound stagnation of that which 
is in circulation, has engendered a system of credits. 
He must conform to this system in order to compete. 
This soon depletes his little treasury, and, before he 
is aware, he has unwittingly committed the cardinal 



12 The True Function of Money 

sin of becoming short of that medium which the law 
ordains legal tender. Ruin, utter ruin and disgrace, 
the welfare of his family, the pitying glances of his 
friends, — all rise before him like a hideous nightmare. 
He feels the more advanced pangs of hell's torment. 
His friends would gladly help him in his extremity, 
but they are in the same fix. seeking, not granting 
salvation. 

In this crisis, there is but one house of refuge 
open to receive him, — his local bank, — with his tem- 
poral savior, the manager thereof, waiting to grant 
salvation ; that is, if he so sees fit. Penitently he ap- 
proaches, truthfully he discloses his private business 
affairs, and humbly he prays for a remission of his 
sins, — the price or penalty thereof to suit the banker's 
pleasure. He thus discloses, to the very one who con- 
trols his destiny, the innermost secret of his ability 
to maintain independence, and has incidentally di- 
vulged the business of all his friends with whom he 
has or had dealings. He is now at the full mercy 
of the bank. There is nothing left to do but watch 
the banker's thumbs. Thumbs up means, let him 
live ; thumbs down means, let him die, commercially 
speaking. 

Thus the bank has become our universal house 
of temporal salvation ; the shrine of the almighty dol- 
lar, our altar ; and the manager of the bank our tem- 
poral savior. Under the present system of permitting 
money to become a profit-producing commodity, there 
is no escaping a membership in the faith. Deflection 
from its tenets brings disaster, and a refusal of the 
benefits of civilization. 



The Mercenary Fezv 13 

These conditions throw him into the ranks of 
labor, where he is so manipulated by the very force 
which crushed him, that naught but his daily bread 
shall be his, the profits of his labor being systematic- 
ally absorbed by the banks, by reason of the money 
loaned to his employer, as will be seen later. 

The producer of today seems as ignorant of his 
rights as he was in former ages. He complacently 
accepts the doctrine, that in order to avoid poverty 
he must practice it ; to escape being a pauper, he must 
live the life of a pauper; and to enjoy the world he 
must persistently reject all its beauties. 



CHAPTER II 
BANKS AND THE BANKING SYSTEM 

THE business world holds the same relation to 
the banks and the money-lenders that the play- 
ers on the outside of the table do to a faro bank. 
The "bank" has the medium of exchange all hoarded. 
This medium is evidenced by little celluloid chips or 
discs. The players borrow these chips by depositing 
money as security. Thus equipped, they begin to strive 
for profit by taking chances on the fall of the play. 
They win and lose, apparently from the "bank," but 
actually from each other. The "bank" loses nothing, 
but, to the contrary, is the only winner, the percentage 
on the game, — the interest. 

Gambling is so demoralizing and useless that legis- 
latures pass laws prohibiting the practice. Loaning 
money by privately controlled banks is just as unde- 
sirable and unnecessary : yet. under our present sys- 
tem, it is a highly respectable occupation. 

Money, as decreed by the various governments, is 
evidenced by small gold and silver discs and paper. 
These coins and bills, as they are called, are very 
easily lost or stolen, and when once gone are hard to 
identify. It is impracticable for each citizen to pro- 
vide a thief or burglar-proof vault wholly for his own 
use ; consequently, a few men will construct a vault 
sufficiently large to accommodate a great number, and 



Banks and The Banking System 15 

others deposit their money therein. This constitutes 
a bank. 

Naturally, the depositors do not feel that it would 
be fair for the banker to take care of their money for 
nothing, and hence arises the tacit understanding that 
the banker shall have the privilege of loaning the 
money, and whatsoever it shall profit in interest will 
be his. This arrangement is eminently satisfactory 
to the banker. 

With this control the banker is in a position to 
inaugurate a system so like unto the faro game just 
described. He has control of the chips, — the people's 
money. He passes them out to the people again with 
the compact that they will be returned at a stated 
time, plus the interest. The people receive the chips 
(loaned money) and enter with zest into the grand 
game of profit and loss. What one wins the others 
lose ; — but not the bank. The more some win, the 
more others will lose ; but not the bank. Every win- 
ning by some makes a losing by others a certainty, 
and of which of them the banker wots not. Scarcity 
of money aggravates the trouble ; higher and higher 
mounts the rate of interest ; and more and more is 
the money hoarded. Sooner or later the people's 
money on deposit has accomplished a most astonishing 
feat : it has won itself away from the people and 
passed into the hands of the banker. 

For all this the people have received naught in 
return, unless, perchance, a pleasant smile and the 
pleasure of being addressed by their correct names. 
Wall Street is the place where this system is operated 



16 The True Function of Money 

on a wholesale plan, and each bank throughout the 
country is an active assistant. 

Imagine a business, the full productive capital of 
which is furnished by the people, but which is oper- 
ated in behalf of private individuals, and directly 
against the interests of those who furnish the capital. 
In time the bankers have won from the people all that 
the people had, and this without the slightest risk and 
without one tap of productive labor. 

The banking system divides the world into two 
rclasses — the depositors, the constant borrowers of 
' their own money ; and the bankers, the constant lend- 
ers of something they do not own, and at the price of 
an enormous tribute. This gain is greater by far than 
the gain of the most favored commodity, and is great 
enough to absorb in the aggregate the profits of the de- 
positors. 

Let us examine the possibilities of these gains : 
The Federal Reserve Act provides as follows : 

"Sec. 19. Demand liabilities within the mean- 
ing of this Act shall comprise all deposits payable 
within thirty days, and time deposits shall comprise 
all deposits payable after thirty days, and all savings 
accounts and certificates of deposit which are subject 
to not less than thirty days' notice before pay- 
ment. * * * 

"(b) A bank in a reserve city, as now or here- 
after defined, shall hold and maintain reserves equal 
to fifteen per centum of the aggregate amount of its 
demand deposits and five per centum of its time de- 
posits." 



Banks and The Banking System 17 

The reserve of a bank is that portion of its de- 
posits which is kept in hand to meet average liabili- 
ties, and which is therefore not employed in discounts/ 
and loans. 

These provisions of that act make the following 
a possibility : — I can open a bank and the people will 
deposit with me one hundred thousand dollars pay- 
able on demand. As I have to keep only fifteen per 
cent of my aggregate demand deposits, I can make 
an initial loan of eighty-five thousand dollars. This 
money, in practice, is not withdrawn from the bank, 
but is left as a checking account. However, if the 
money is really taken out of the bank and paid to an- 
other person, that person immediately re-deposits in 
the bank. It makes no difference which bank he de- 
posits in. as all the banks enjoy all the deposits, and 
this will give me my share. 

That we may more clearly perceive the condition, 
we will say that this same eighty-five thousand dollars 
are re-deposited in my bank. This gives an added 
deposit, in the aggregate, and I can now loan 85% 
of this amount, or seventy-two thousand two hundred 
and fifty dollars. 

This sum is re-deposited with me, and I can again 
loan 85% of this amount, or sixty-one thousand four 
hundred and twelve dollars and fifty cents. 

We now understand the possibilities. Carry this 
computation through, and we see that a bank with one 
hundred thousand dollars demand deposits can be 
strictly within the law and yet create an interest-bear- 
ing debt of five hundred and sixty-six thousand six 
hundred and sixty-six dollars and sixty-six and two- 



18 The True Function of Money 

thirds cents, and in the end will have the original one 
hundred thousand dollars as reserve in the bank. 

Figure the above sum on ninety-day loans at 8% 
per annum, and we find the interest for one year to 
be forty-six thousand seven hundred and eleven dol- 
lars and fifty-five cents, or a little over 46.7% on the 
original one hundred thousand dollars, — which is all 
the cash used in the transaction. Figure the same 
sum at 12%, the usury limit in some states, and we 
find the interest, for one year, to be seventy-one thou- 
sand one hundred and twenty-one dollars and sixty- 
six cents, or more than 71% on the original one hun- 
dred thousand dollars. 

The same law permits the time-deposits to be so 
manipulated that they will create an interest-bearing 
debt of one million nine hundred thousand dollars, 
which sum, computed at 8% per annum on ninety-day 
loans, will yield one hundred and fifty-six thousand 
six hundred and twenty-one dollars and ten cents, or 
more than 156% per annum on the original one hun- 
dred thousand, and at 12% will yield two hundred and 
thirty-eight thousand four hundred and sixty-six dol- 
lars and seventy-four cents, or more than 238% per 
annum on the only cash in the transaction, — the orig- 
inal one hundred thousand dollars. Our banking sys- 
tem is thus in a position to receive the people's money 
on deposit and use it to saddle the above enormous 
debt upon the same people, and levy the crushing trib- 
ute which the foregoing figures disclose. 

This practice of exacting interest on money by a 
privately-controlled banking system has brought the 
monev, — the blood of commerce. — into the hands of 



Banks and The Banking System 19 

a very few ; and thereby constitutes them the autocrats 
of our temporal destiny. They are thus empowered at 
will to contract or expand the volume of money in cir- 
culation. The contraction is accomplished by period- 
ically refusing loans and calling in all outstanding ob- 
ligations, which in turn stagnates and demoralizes 
business. 

The principle of the right of money to earn in- 
terest is based upon the false conception that money 
is a commo'dity. The so-called orthodox political 
economist is quite satisfied with this conception. That 
we may perceive the fallacy of this reasoning, let us 
assume this idea to be sound. Under these conditions 
two men labor at the same work for the same' length 
of time. One takes his pay in money, say one hun- 
dred dollars, and the other in a horse valued at an 
equal amount. They each start a savings-bank, one to 
use his money an"d the other to use his horse, for loan- 
ing purposes. As before seen, the man with the money 
can create an interest-bearing debt of nineteen times 
the amount of his money, and in the end will have all 
his money back in the bank as a reserve. Apply the 
privilege of the banking law to the man with the horse, 
and he could have nineteen horses earning for him, 
and in the end will have his horse back in the bank. 
It is evident that there are not nineteen horses earn- 
ing; still, the owner of the horse can collect these vis- 
ionary earnings. This is exactly what is done by the 
banker. 

It is strange that the same intellect will pronounce 
this transaction the height of absurdity when applied 



20 The True Funetion of Money 

to the commodity. — horse. — and a paragon of common 
sense when applied to the alleged commodity, money. 

Most people entertain a deep-seated conviction 
that, if a bank loans five thousand dollars, and the 
borrower purchases an autotruck with the money, the 
bank had furnished the borrower with the autotruck, 
and. in sound logic and justice, has an interest therein 
which entitles it to share in the profits earned by the 
truck, and also to have those profits guaranteed. Let 
us analyze this transaction and comprehend exactly 
what was done. It is evident that the borrower could 
not have negotiated the loan unless his credit was am- 
ple to cover all demands. This credit, then, was the 
capital with which he sought to acquire the autotruck. 
His credit is based upon one hundred thousand bush- 
els of wheat of a market value of one hundred thou- 
sand dollars. He would gladly exchange five thou- 
sand bushels of wheat for the autotruck, but the seller 
cannot use wheat. — he must have some other com- 
modity, or perhaps several commodities. 

This gives rise to that complex exchange which 
requires a medium for the economical consummation 
thereof. The borrower must apply to the banker for 
a loan, that is. the privilege of using his own credit. 
The banker says : "Permit me to levy a tax upon your 
credit, that thing yott have produced, and / will per- 
mit you to use it : and as a security that you will pay 
me this tax. together with my means of levying the 
same. — the principal. — you must pledge to me all your 
substance." 



Banks and The Banking System 21 

This is the unfounded and unauthorized basis 
upon which the profit-producing power of money is 

placed. An understanding of the true status of money 
will point the way to a correction of this evil. 



CHAPTER III 
THE ORIGIN OF MONEY 

WHEN living in a primitive condition, hu- 
man beings have no need for money. All 
commerce may be carried on in the prim- 
itive manner in which they live. It is natural 
and convenient to barter among themselves with 
the actual commodities at hand. Thus, one will 
have a fish and another a rabbit. It transpires 
that they are each fond of fish and rabbit and desire 
to have a little of each, rather than all of one or of 
the other. As a result, they agree to exchange one- 
half a fish for one-half a rabbit, and vice versa. Hav- 
ing done this, a transaction has been consummated in 
the world of commerce as full and complete as any 
which has ever heretofore been or will ever hereafter 
be efifected. The purchase of a battleship by one na- 
tion from another is no more a complete transaction 
than this. 

This primitive method of carrying on commerce 
can remain in its simplest form only so long as each 
member of society is an actual producer and simple 
and modest in his desires. Complex conditions, con- 
certed action along special lines of endeavor, larger 
and more elaborate transactions in the world of com- 
merce and multitudinous desires engendered by ad- 
vancing civilization, all tend to make it impossible to 
carry on trade in this simple form. It then becomes 



The Origin of Money 23 

necessary to exchange credits for commodities, — 
hence all nations have been called upon to invent and 
adopt means to accomplish this end. 

Evidently one very simple, natural and complete 
method presented itself, for all nations perceived it 
and all nations have adopted it — Money. By the use 
of this medium credits may be exchanged and com- 
plex transactions simplified both as to time and quan- 
tity. Money, then, is chosen as a me^dium to assist in 
these transactions as the natural, logical and complete 
solution of the problem. This is the normal, the one 
and only use of money. No other condition called it 
into being, and no conditions whatsoever have en- 
larged or detracted from its usefulness, nor in any 
way changed it from the simple meaning of its defini- 
tion, "A medium of exchange." 

By some strange means, however, money has be- 
come diverted from this natural and only use. By a 
crude course of reasoning it has been permitted to 
become the gyves and fetters of the struggling masses. 

The human family evolved from some unknown 
source. According to Aloses, we are descended from 
a perfect pair in the Garden of Eden. According to 
Darwin, our ancestors were not so perfect. It mat- 
ters not as to our origin. We have sufficient exact 
knowledge of the matter to know that we have been 
here a long time and that history nowhere relates a 
change in the dominating demands of existence. Fore- 
most among these demands is that of production. Food, 
raiment and shelter must be produced in order that we 
may live. Having thus provided subsistence, another 
demand of equal importance arises. We must protect 



24 The True Function of Money 

these means of existence from the encroachments of 
enemies. These demands were urgent, and society- 
was called upon to devise ways and means. As a so- 
lution it became evident that two armies must be or- 
ganized, — an Army of Industry and an Army of De- 
fense. These armies, unequipped, were inefficient. 
The army of defense was powerless to accomplish that 
for which it was organized, unless armed with weap- 
ons of defense. The army of industry was powerless 
to accomplish that for which it was organized, unless 
armed with a medium of exchange, — a method by 
which credits could be expeditiously and economically 
exchanged for commodities. 

These requirements were evident from the be- 
ginning. In the evolution from the family to the tribe, 
from the tribe to the State, and from the State to the 
Nation, we find, concomitant therewith, the families 
with their pieces of silver and slingshots, the tribes 
with their wampum and war clubs, the States with 
their currency and musketry, and the Nations with 
their gold standard and machine guns. The idea and 
necessity for proper equipment of the two armies is 
one and inseparable. 

The army of defense is recruited from the body 
of the people and officered by men best suited for 
thait purpose. The nation as a whole, acting through 
its representative government, determines what the 
equipment shall consist of, and acquires and issues 
the same to the army for use only. To each soldier 
is provided all the equipment he can use, to the extent 
of his ability ( his credit.) The soldier can never ac- 
quire title to this equipment. He cannot refuse to 



The Origin of Money 25 

use it himself, nor can he loan it to other soldiers for 
a consideration, — a proceeding which would soon bring 
all the equipment into his hands. 

No soldier, nor association of soldiers, can estab- 
lish an arsenal where other soldiers may deposit their 
public equipment, to be in turn loaned to needy war- 
riors, and always for a handsome consideration, pay- 
able to private individuals ; or refuse the use of this 
public property to the army, though it may be in sore 
distress. No soldier can refuse to use his equipment 
and lock it up in a safe-deposit box, thereby defeating 
other needy soldiers in the privilege of its use. To 
the contrary, every soldier uses the equipment as long 
as he is able to, or as long as he needs it ; and when 
the need therefor ceases, or the soldier becomes in- 
capacitated, his equipment is forthwith deposited in a 
public arsenal, to be re-issued to another who is at 
that time withstanding the brunt of battle. 

This system of strict accountability to the people 
through their organized government makes for the 
highest efficiency in the army of defense. Soldiers 
and equipment are ever ready and answerable. In 
periods of great strife and dire necessity there is no 
haggling with a coterie of private individuals for the 
use of equipment, with a possible refusal in toto; and 
if granted, it is done at a price that is staggering. 

The army of industry is recruited from the body 
of the people and officered by men best suited for 
that purpose (the employers). The nation as a whole, 
acting through its representative government, deter- 
mines what the proper equipment for this army shall 
consist of. anil acquires and issues the same. It is 



26 The True Function of Money 

needless to say that the equipment in this case is 
money, — a medium of exchange. 

Thus far these equipments seem identical. They 
are for the same purpose, are determined and issued 
by the same authority, and in ample quantities to in- 
sure efficiency. At this point, however, a radical di- 
vergence occurs. In the place of this last equipment 
being issued to the army of industry for use only, it 
is the accepted opinion that it is issued as a commod- 
ity, to be bartered and traded like any other commod- 
ity. The purpose for which it was devised is ignored, 
and the question of the efficiency of the army is rele- 
gated to a seat far in the rear. The proper idea, in 
the accepted opinion of mankind, is promptly to be- 
gin to barter, trade, and haggle with this equipment. 
The first who will refuse to be a soldier and refuse 
to use his equipment (Money), but loans it to some 
needy warrior for a price, and persistently follows this 
course, soon blossoms forth as an eminent financier. 
He who thus refuses to take his place in the ranks 
obliges others to fight his battles for him and levies 
a crushing tax on them for the privilege. 

The first individual or coterie of individuals 
thus refusing to become soldiers and refusing to use 
their equipment, but instead will construct a deposi- 
tory for such equipment (a bank) wherein all other 
individuals who refuse to use their equipment may 
come and store the same, will be most advantageously 
circumstanced. 

They who thus refuse to answer the draft are 
now in a position to take that which they do not even 
have the use of, and so manipulate the same that the 



The Origin of Money 27 

boys in the trenches do not know from one day to the 
next how much equipment will be at their disposal. 
The manipulators, far in the rear, are sole arbiters 
of this matter, self-constituted and answerable to no 
appeal. At best, if those in the forefront of strife 
are to have the use of any of this equipment, it is at 
the price of a crushing tribute. Whenever it is to the 
best interest of these manipulators, the demand for 
equipment in the trenches is ignored ; as a result the 
army is paralyzed, the common foe of starvation and 
misery stages a drive, the army is routed and. being 
closely pursued, the retreat becomes a panic. They 
are now perfectly good soldiers out of a job. They 
have become a motley, disorganized mob, generically 
known as the ranks of the unemployed. They meet 
on a neighboring sand lot and vehemently denounce 
their officers and the entire staflf for this debacle. The 
officers and staff in turn hotly respond anxl blame the 
rank and file. , 

The real cause of the trouble should be laid at 
the door of those manipulators who, for private gain, 
refused the use of public equipment. 



CHAPTER IV 

DEFINITIONS OF MONEY 

THE definitions of money adopted by modern 
political economists are : 

1st. Money is a medium of exchange. 

2nd. Money is the measure of value. 

3rd. Money is the circulating medium. 

The third definition is quite meaningless. It con- 
veys no definite idea. 

Money is the established measure of value (pri- 
marily of the value of credit) and takes its place 
among the measures of other quantities, such as length 
and weight. 

Every article of wealth (commodities) contains 
one or more of three elements — weight, dimension 
and value — which must be standarized. (Credit has 
but one element, value). To accomplish this, a unit 
for each element is established by law. These units 
are simple and familiar to all : the yard, the pound 
and the dollar. There is nothing intricate and mysti- 
fying about any of them. Honestly to perform their 
functions, it is vital that the yard be maintained a 
yard in length, the pound a pound in weight, and 
that the dollar be a dollar-worth. The yard measure 
and the pound weight are fixed and stable and will 
fully perform their functions at any time. The dollar 
is not stable — that is, not always of the value of a 



The Origin of Money 29 

dollar-worth — a condition which materially impairs its 
usefulness. The accepted idea that money is a com- 
modity, subject to private ownership and control, pre- 
vents it from thus properly functioning. This condi- 
tion arises by virtue of the fact that the dollar, in addi- 
tion to its function as the measure of value, must also 
serve as the medium of exchange of credits. This 
added function is as simple and natural as the former, 
provided that the dollar is permitted to assume its true 
status. Under our present system this is not possi- 
ble. 

None of these definitions, either directly or by 
implication, describes money as either gold or silver, — 
a commodity,- — an article of commerce to be bought 
and sold on the market as a profit-producer. None 
of the political economists, whose works it has been 
my pleasure to peruse, have in any way intimated that 
such a definition would be correct. Most of them are 
content with the simple phraseology of "money is the 
medium of exchange." Webster defines it as "a me- 
dium of commerce." He also defines a commodity as 
"including every thing movable that is bought and 
sold — goods, wares, merchandise, produce of the land 
and manufacturing," etc. 

Money is the medium chosen to facilitate the in- 
terchanging of commodities by the use of credit. If 
that medium should become one of the commodities, 
it must, as a matter of necessity, lose its identity as a 
medium of exchange. The assumption of such dia- 
metrically opposed characteristics is untenable ; and 
when we further consider that money is by law made 
legal tender, that is, "currency that the law permits 



30 The True Function of Money 

one to offer, and requires another to accept, in pay- 
ment of a debt," it is impossible to contemplate it as a 
commodity. 

Commodities are the basic foundation of all pro- 
duction and commerce. Nothing else is wealth. Any 
product of labor, physical or mental, which gratifies 
a desire of mankind is a commodity, and is subject 
to private ownership and control ; and, if it be a 
tangible thing, it is proof of its own existence and 
quantity. 

Credit is the right to exercise private ownership 
and control of a commodity. It is no part of wealth. 
Credit may be specific or universal, — specific, when 
attached to a particular commodity, and universal 
when it may be applied to any commodity and at any 
time. The commodity and the credit in the commodity 
are separate and distinct negotiable entities, and they 
may both be in the same owner or each in a different 
owner, and in that case the commodity is proof of the 
existence and the measure of quantity of the credit. 

In commercial transactions one may sell his credit 
and reserve the commodity ; or, he may sell the com- 
modity and reserve the credit ; or he may sell both 
the commodity and the credit. If he desires to sell 
his specific credit and reserve the commodity, he exe- 
cutes a note and mortgage on the commodity, and the 
transaction is termed a loan. If he desires to sell the 
commodity and reserve the specific credit, he trans- 
fers the commodity to the purchaser and accepts a 
note and mortgage on it for the purchase price, and 
the transaction is termed a sale with note and mort- 



The Origin of Money 31 

gage back. If he desires to sell both the commodity 
and the credit, the sale is made without reservation 
and he accepts as the equivalent a universal credit in 
all commodities : this transaction is termed "for cash." 

Commodities and credits are the only entities ne- 
gotiated in any of the foregoing transactions, and they 
each have their value inherent. This value exists 
without the aid of or the slightest reference to money. 
If it were possible to assure the world, by individual 
testimony, of the existence and amount of credit de- 
sired to be exchanged at any time, money would be 
an unknown quantity. Credits could be passed in 
parole, and commerce could thus be carried on without 
difficulty. 

A credit can be created only by first creating 
an article of wealth, — a commodity. The creation of 
money does not create credit, for a commodity which 
must precede a credit cannot be created by law. In 
order to acquire money an individual must first have a 
properly created credit. Having this credit already, 
money adds nothing to its value. Accumulation of 
money by interest on money does not accumulate an 
honest credit, for credit thus accumulated has had no 
article of wealth previously created for a mother; and 
as it must have had such a mother, it must have been 
taken away from the creator of that mother, and for 
no value received. 

As long as a credit can be traced to the com- 
modity which gave it birth, that commodity is proof 
of the existence of the credit and its quantity; but 
when it becomes universal it lacks this proof. This 



Ii2 The True Function of Money 

defect was easily remedied. The people, by agree- 
ment which has passed through the proper channels of 
civilized governments and has been crystallized into 
law, are to guarantee all representations of any owner 
of credit as to its existence and quantity while in this 
intangible and universal form. The governments ac- 
complish this by issuing authentic and guaranteed 
proofs of these facts. This proof has a standardized 
unit, and is issued in such unit, and fractions and mul- 
tiples thereof, that any desired quantity of credit may 
be accurately measured. 

The means or substance employed to convey this 
governmental guaranty could be anything, subject 
only to the requirements of convenience and stability. 
Gold and silver have been chosen, not with the slightest 
reference to their value, but solely to such convenience 
and stability. Paper is far more convenient, but. un- 
less limited to a fixed standard, it lacks stability. 

I call your attention to the fact that our copper 
coins are not redeemable in gold. Their worth as 
money depends entirely upon themselves. Cast copper 
is worth, on an average, fifteen cents the pound; 
coined copper is worth one hundred and forty-five 
cents the pound. Neither value is related to nor does 
it in any way affect the other. 

That we do not confuse money. — that entity 
which is created by law. — with the substance, gold 
or silver, is paramount. Gold or silver bullion is a 
commodity ; when coined it is devoted to the purpose 
of conveying that intangible function of the law — 
money — and it then ceases to be a commodity. Gold 



The Origin of Money Z2> 

and silver bullion is not money any more than is lead 
or zinc. Even though a nugget of gold of the exact 
weight and fineness of a ten-dollar gold piece were 
coined exactly as money by an individual, it would 
not be money. It would be a counterfeit. Gold and 
silver must have some added attribute before they can 
function as money, and this attribute could be im- 
parted to lead or zinc as properly as to gold or silver. 
This attribute has no connection with nor dependency 
upon the substance which may be chosen as its ve- 
hicle. It is an entity within itself. — a law. whose only 
purpose is to function as a medium of exchange and 
legal tender. The failure to distinguish between the 
two entities, money and gold, leads to a confounding 
of the two, with the resultant generally accepted belief 
that they are one and the same thing and that that 
thing is gold. 

This vital distinction having escaped them, they 
who are profoundly versed in the laws of economics 
have no difficulty in rapidly reasoning as follows : — 
Money is gold ; gold is a commodity : a commodity is 
wealth ; wealth can become capital ; capital has earn- 
ing power and is subject to private ownership and 
control. Hence, a fortiori, money — a law — has earn- 
ing power and is subject to private ownership and 
control. This again emphasizes the importance of 
having a correct starting-point if you wish to find a 
correct stopping-point in any excursion, be it in travel 
or speculation. 

As gold and silver bullion has no value nor earn- 
ing power as mouev. but requires an added attribute 



34 The True Function of Money 

before it can function as money, and as that added 
attribute is created by law, then that added attribute 
has no value nor earning power, for value and earning 
power cannot be created by legislation. The votaries 
of our present monetary system strenuously affirm 
this economic fact when mention is made of issuing 
inconvertible paper money. 

Take the two pieces of gold mentioned above ; — 
of the same weight and fineness and coined in exact 
duplicate, one by an individual and the other by the 
government. One will be money and the other a coun- 
terfeit. One is the medium of exchange and legal ten- 
der, the other is not. A vast difference exists. Lay 
them upon the table before you ; carefully scrutinize 
them and see if you can discover what causes this 
difference. You will fail. The only answer you can 
give yourself is, that you have faith in one and doubts 
about the other. You have faith in the one because 
you have faith in your government and the laws pro- 
mulgated by it. This faith which you have in the laws 
of the land is what constitutes money, and faith is not 
a commodity. No individual can have a right to con- 
trol the volume of that faith to be exercised by others, 
nor has he a right to tax others for the privilege of 
exercising their faith in their government just as 
freely as is his own right. 

Gold and silver are the physical substances chosen 
by which to convey the government's proof and guar- 
anty, just as I use the paper upon which I now write 
to convey my thoughts. The medium itself may be of 
little or no value ; it is the proof and guaranty stamped 



The Origin of Money 35 

on the medium which function and are of value. 
Money in its last analysis is but a function of govern- 
ment, and it is this function which the bankers and 
money-lenders arrogate unto themselves as a com- 
modity, and for the privilege of its use levy a private 
tax upon industry and commerce. 

If a loan were made to one without credit, he 
would be getting something which he did not pre- 
viously have ; but money-lenders do not do business 
that way. No one can borrow money unless he first 
have a specific credit. As he already had the credit, 
he does not desire to borrow any more credit. His 
pressing need is to be able to convert his specific credit 
into a universal form. This he cannot do except in 
the manner provided by law. This way, this law, is 
in the control of the money-lenders, and the capital- 
izing of this law of the land is what is known as the 
banking business. 

Conceding money to be a commodity is the error 
upon which all subsequent reasoning is based. This 
opens the portals, and the logic of economics carries 
us irresistibly to an erroneous conclusion. Having 
accepted money as a commodity, it automatically fol- 
lows that it is wealth, and this in turn gives it the 
properties of capital, thus assuring it the right to earn. 
Having established its status as a commodity, all the 
prevailing rules of political economy are easily and 
conclusively applied. The most convincing logic, when 
applied to an erroneous assumption of facts, gets us 
nowhere. No assertion is as valuable as one small 
fact. Neither a law nor the functions of a law can 
become a commodity. 



36 The True Function of Money 

The basic foundation of civilized governments is 
security to each individual in the undisturbed posses- 
sion of all the things which are rightfully his. These 
things are the articles of which the world's wealth is 
composed ; hence the true interest of each individual 
lies in an assurance that he will be protected in the 
ownership of these things, and in his credit or right 
to them. This assurance is evidenced by money; 
money is thus the guaranty of the government. That 
is what it is created for, and that is what it should 
be used for; and to that end, the government, and the 
government only, should have control of that guaranty 
for which it alone stands sponsor. 

What a travesty to contemplate a private indi- 
vidual dictating terms as to time and quantity of gov- 
ernmental guaranty, and this for purposes of his own 
private gain ! These tokens of the government's guar- 
anty must be permitted to flow freely for the purposes 
intended, and they must not be allowed to become 
stagnant and clogged at the individual caprice of any- 
one. 

In the first instance, this protection of an indi- 
vidual's rights by civilized governments is evidenced 
by money as a matter of convenience only. The real 
guaranty to the citizen is his faith in his government. 
This is. in fact, what money is based upon. This good 
faith of the government and the people, and of the 
people one with the other, is preserved by a simple 
record of each day's transactions, — book-keeping. 

In this system of book-keeping, wherein each 
transaction of the day is conveniently and correctly 



The Origin of Money 37 

recorded, money is the great day-book ; the sum total 
of the entries therein must be posted to the ledger, 
the government bank, so that it, — this great day- 
book, — may be free for entries on the following day 
by those who so desire. 

Let us use a simple illustration of this book- 
keeping. The City of Seattle owns its street-railway 
system. Owing to the price paid for this utility, 
plus the interest charges, it became necessary to place 
the fares at 8 1/3 cents. As this is a sum which 
cannot be paid in money, the city adopted the expedient 
of coining and issuing metal tokens, each token repre- 
senting the price of one fare. 

For the purpose of exchanging credit for street- 
railway service, these tokens thus became the medium 
of exchange, and also legal tender, as fully as those 
functions apply to money. For the purpose thus in- 
dicated these tokens are money in its fullest sense. 

The depositary of these tokens is the city, and 
they are distributed through various agencies, the 
most popular of which consists of the conductors on 
the cars. Thus the volume of tokens in circulation is 
controlled by the city and is in such quantity that any 
patron of the railj^way can easily get the use of them 
to the limit of his universal credit as evidenced by that 
guaranty — money. We never hear the complaint that 
"tokens are tight." The idea that they are a commod- 
ity to be owned and controlled by individuals and used 
for profit-producing, or that they can come into the 
hands of a few and be so hoarded as to produce a 
panic and hard times in the railway service, would be 
scouted by the most ordinary of minds. 



38 1 he True Function of Money 

These tokens function freely, keeping an exact 
account of the amount of credit exchanged daily for 
service, and everything co-ordinates with precision. 
Without them a most annoying and interminable sys- 
tem of accounts would be necessary, which would 
produce a condition approaching the impossible. As 
the tokens are redeemed daily by the city, they become 
immediately available by the patrons of the road for 
further use. 

Picture to youself the conditions if these tokens 
were issued by the city as a commodity, to take their 
place in the world of commerce as capital. You can 
easily perceive that a few of the patrons of the rail- 
way, who will have the instincts of the banker well 
developed, could and would "corner" the tokens and 
refuse the rest of the patrons the privilege of acquiring 
any, unless they "borrow" them and pay the "bankers" 
a tax for their use. Yon can also visualize a periodi- 
cal scarcity of tokens caused by a refusal of those who 
"own" and control them, even to make a "loan." 
This will produce the spectacle of a fully equipped 
and robust railway system standing ready to perform 
its functions, on the one side, and, on the other side, 
thousands of patrons with unlimited credit desiring to 
avail themselves of the service. Between them stand 
the "bankers" in complete control of the situation by 
virtue of their control of the medium which would 
|)ermit of co-ordination. The result of it all would be 
misery and disruption to the patrons ; bankruptcy for 
the railway, and destruction of the service. 

As you contemplate this picture and learn to 
loathe it, you may truthfully assure yourself that 



The Origin of Money 39 

you are gazing upon an exact replica of the master- 
piece, painted by the bankers and money-lenders, de- 
picting present conditions in the commercial world 
as brought on by the accepted idea that money is a 
commodity. 

If the control of money were retained by the 
government and a free and adequate circulation there- 
by assured, the industrial and commercial world would 
be as free from economic upheavals as are the patrons 
of the Seattle street-railway. 



CHAPTER V 
THE PERVERSION OF MONEY 

MONEY is perverted from its proper use by 
conceding to it the status of a commodity 
and thus permitting it to enter the field of 
profit-producing. 

Demanding and getting interest on money results 
in hoarding the same. Hoarding money takes it out 
of circulation ; taking it out of circulation produces 
a scarcity. This, by the natural law of supply and 
demand, creates a market value. The greater the 
scarcity, the keener the demand, and the higher the 
market value or profit. This in turn accelerates the 
hoarding process, and so on ad infinitum. 

Money is the blood of commerce, flowing natur- 
ally through the veins and arteries when commerce is 
normal. When commerce is abnormal, and congestion 
occurs at any place, money should, and would if per- 
mitted, flow to that place and restore equilibrium, just 
as the blood does in a living body. Should there be a 
demand for a certain commodity in one locality, and 
a surplus of the same commodity in another, money 
will pass readily to the surplus, supply the demand 
and thus restore the equilibrium. 

It is the water of commerce, constantly carried 
back to its source, to flow down the mountainsides, 
across the plains and meadows, ministering to the 



The Perversion of Money 41 

wants of animal and vegetable life, causing all to re- 
joice and revel in health and happiness. 

M'ould anyone believe that things were as they 
should be if the blood, as it courses through the veins 
to the heart, were not permitted to return through 
the arteries, to perform its natural function without 
paying toll to some private individual standing by the 
gates to the heart? 

How long w^ould the dews, and the rains from 
heaven, and the rivers and rivulets of the world give 
life to this fair land if the sun should fail to evap- 
orate the full amount of that vital fluid, to be wafted 
back to its source; but, to the contrary, should levy 
tribute and give back a diminishing supply? Devasta- 
tion, as swift and sure as night follows day, would 
be the result. 

Money, when first issued, is akin to water; it 
flows freely over the land ; it is taken at its true value 
and moves easily for the purpose intended. Out it 
rushes through natural channels, like w^ater, slaking 
the thirst of animal and vegetable life. All are w^el- 
come to come and partake of the bountiful gifts of 
God. Onward they flow\ dispensing joy and satisfac- 
tion along their paths, till the water is finally dis- 
charged into the sea, and the money into a bank, where 
they immediately change character. The water be- 
comes contaminated with the salt sea, and will no 
longer invigorate the land ; the money becomes con- 
taminated with the blight of interest, and no longer 
animates commerce. The w^ater must be distilled by 
the sun before it is again fit to purify the earth; the 



42 The True Function of Money 

money must be distilled by labor before it can again 
enrich the fields of commerce. The sun distils and 
gives back freely every drop of water ; labor can dis- 
til but a percentage of the money deposited in a bank. 
The remainder is left in the hands of those who have 
no right thereto, — the bankers and money-lenders, — 
to be used as the instrument with which they exact 
the fruits of labor from a suffering and struggling 
humanity. 

The rapidity of interest accumulation is realized 
but by a very few. A tabulated statement exhibiting 
this phenomenon will be interesting and instructive : 
Money at 4% simple interest doubles in 25 years. 
Money at 4% compounded yearly doubles in 17.6 yrs. 
Money at 5% simple interest doubles in 20 years. 
Money at 5% compounded yearly doubles in 14.2 yrs. 
Money at 8% simple interest doubles in 12.5 years. 
Money at 8% compounlled yearly doubles in 9 years. 
Money at 10% simple interest doubles in 10 years. 
Money at 10% compounded yearly doubles in 7.2 years. 
Money at 12% simple interest doubles in 8.3 years. 
Money at 12% compounded yearly doubles in 6.1 years. 

Compared with the profits in some lines of specu- 
lation, for a short while, these gains seem small; but 
when we consider that they are certain and will con- 
tinue forever, and are constantly augmenting the earn- 
ing power of money and correspondingly decreasing 
the amount in circulation in the hands of the honest 
investor, one may readily see the enormous gains that 
eventually result. 

If commotlities and money were left in their proper 



The Perversion of Money 43 

spheres, that is. the commodity, the real value and 
producer of profits ; and the money, a mere lieu or 
factor of exchange, with no real value, and non- 
profit-producing ; it does not require a very profound 
deduction to conclude that the commodity would be 
the thing of interest, and the money a mere auxiliary 
thereto. Money would be seeking investment ; there 
would be no incentive to hoard and withhold it from 
use. 

That this natural and logical condition does not 
exist is patent. That the dollar is king and master 
is evident to us all. That money has acquired an 
unnatural value and power is apparent. Money has 
become the master, commodities the servelings. To 
have accomplished this, money must have met com- 
modities in the open field with favors and come ofT 
the victor. Money must indeed have become the com- 
modity, the profit-producer, and the true commodity 
a mere incident, or, at best, a very poor second. It 
has been permitted to enter a perverted channel and to 
become a producer of profit ; something entirely for- 
eign to its original and only intended use. 

This new use, or rather abuse, of money brings 
its natural results. It is now to the interest of the 
profit-seeker to hoard money, take it out of circulation, 
bend his energies to the accumulation of cash, and 
despise the production of useful commodities. 

We have seen that the only use for which money 
was called into being is to assist in economically trans- 
acting business. It is merely an incident of commerce, 
secondary and subservient to the various commodi- 



44 The True Function of Money 

ties, in the economical exchange ol which it is but an 
humble servant. It is the blood of commerce, carrying 
its red corpuscles, gold, and its white corpuscles, sil- 
ver, throughout the commercial world. 

As long as money is left to its legitimate use, it 
flows readily, constantly seeking investment in labor or 
some profit-producing commodity. Under the present 
system it is used to cripple industry and to stagnate 
commerce. 

We will assume that the great struggle between 
money on one side, and capital and labor on the other, 
were simmered down to a simple transaction between 
two individuals ; one with the productive capacity of 
brain and brawn, the other with a bag of money. The 
first is actively engaged in producing something to 
gladden the heart of man ; the other is stolidly seated 
on his bag awaiting the day when the first shall feel 
the effect of the scarcity of the medium of exchange, 
the legal tender, and by law must come to him to get 
it. Thus, by a stroke of a pen, he can take from the 
real producer of wealth all the surplus of his earn- 
ings ; in other words, exploit him. 

A young man, rich in brawn and with a fine and 
active brain, will, under the present system, find him- 
self at a loss to acquire some needed legal tender with 
which to discharge his obligations. He applies to the 
only source where he can get it, to the man who has 
it all hoarded and out of circulation, awaiting this 
very moment. He will say : "I am a young man, strong 
and active, and I apply to you to exchange some of 



The Perversion of Money 45 

your hoard of legal tender for some of my labor." 
The money-lender responds : "If I employ you, and 
agree to pay you wages, that is, agree to give you 
some of my legal tender for your labor, I will be ex- 
changing a certain profit-producer, money, for a very 
uncertain profit-producer, labor. My money will pass 
from me forever, and in its place I accept an article 
which enters into direct competition with all other 
articles of its kind, — one of the very articles which 
now stand as a bulwark between my money and loss. 
It would not be good business; my profits would be 
too uncertain and my danger of loss would not be 
properly safeguarded. I must decline to let you work 
for any of that article which the law says you must 
have in order to discharge your obligations. How- 
ever, if you will hypothecate the accumulations of your 
past life to me, and agree to give me the profit from 
your future earnings, I will loan you the required 
amount." 

"But," expostulates the victim, "if I do that, I 
will become your slave forever, as I can never return 
the principal, and in a short while you will foreclose 
and take from me, according to law, all which I have." 

The money-lender replies, "If you do not borrow 
from me sufficient of that article which the law says 
is legal tender, to comply with the demands of your 
creditors, that selfsame law will declare you a bank- 
rupt, and you will of a certainty lose all you have. 
If you borrow of me, and agree to become my slave, 
you have one chance in ten thousand, during the suc- 
ceeding years of your life, of having the wheel of 



46 The True Function of Money 

fortune so turn that you will be mercifully delivered 
from this bondage." 

"I cannot see how you can be so unjust," observes 
the victim. 

"Tut ! tut !" replies the money-lender suavely, 
"you forget that I am foregoing for a time the use of 
this money." 

"Well, if you have any use for the money, how 
does it happen that you can spare any of it to loan?" 
asks the victim. "I have people owing me who are 
in the same condition that I am. If they could get 
money and pay me, I could discharge my obligations. 
Go ahead and use your money for the purposes for 
which it was intended. Employ labor, purchase some 
legitimate commodity, and it will do me as much good 
and will have the added blessing that I \\\\\ not be- 
come your slave." 

"Exactly," smiles the money-lender. "But I have 
a better use for my money. I am going to loan it 
either to the man who owes you, or to the man who 
owes him. I am not particular who first becomes my 
slave. Sooner or later I will have you all. As I am 
an eminent financier, lauded and emulated, I do not 
stoop to note a little thing like that. Think promptly 
and act with decision ; it is the secret of success in 
business. You must choose now, and choose quickly, 
between certain bankruptcy and a period of years of 
bondage. One tenders you nothing but the shame and 
disgrace of failure, with its taunts of bad management 
and incompetency ; the other, secrecy, the staving off 
of the fatal day, and the hope that some time you may 



The Perversion of Money 47 

have the good luck to be released from servitude and 
again be a free man." 

The young man grasps the situation. With a 
sinking heart, he bows his head and meekly receives 
the yoke. 

This picture is not overdrawn. It is the actual 
condition in the business world today. Nor is this 
the worst. If the transaction could be confined to 
the actual borrower and lender, there would be hope 
that this traffic in human misery would be brought 
to an end. But it is not so confined. Our govern- 
ments, State, city and county, are industriously bor- 
rowing for us and pledging our labor to a coterie of 
rapacious bond-buyers. Every railroad, every steam- 
ship company, every industry, a vast majority of the 
farmers who produce our food-stuffs, are borrowing 
for us and passing the burden along to their patrons 
and customers, as an indirect tax, to be bled and torn 
from their hearts. And all this based upon the same 
peculiar logic. 

The money of the world is in the hands of the 
professional money-lenders and bankers. In order 
to finance any project of today, it is necessary to call 
upon them for the funds. It is impossible to persuade 
them to make a legitimate investment ; that is, one 
where they will have to assume their just share of 
loss. It is much better for them to adjust matters 
so that they will have the lion's share if profits re- 
sult, and immunity from loss if such occurs. Hence, 
to accomplish any given object in the commercial 
world, the projectors thereof must assume all loss, 



48 The True Function of Money 

guarantee profit to the money-lenders, and pledge the 
whole project to this end. This places the business 
world at the mercy of those who traffic in the people's 
money. 

How different it would be if the money-lending 
class were eliminated, and every one compelled to in- 
vest his money in its true sense ! 

We have, in the last few years, heard very much 
of the necessity of governmental control from one 
school of thinkers, and of government ownership from 
another school. It is a significant fact that the cor- 
porations whose colossal disregard of the rights of the 
people has given rise to discussions of these differing 
methods of solution, are corporations whose existence 
was made possible by, and whose actual organization 
was the direct act of, the power engendered by inter- 
est on money. Every line of industry which has been 
united so as to control prices, that is, "trustified," has 
received this treatment at the hands of the banks. 
Independent concerns were bought at fabulous prices, 
placed in a trust, and the price of the products con- 
trolled ; and all by virtue of the enormous amount of 
bonds purchased by the banks and the money-lenders, 
the burden of which is laid directly upon the people 
as an indirect tax. 

With every trust and with every corporajtion 
there is a stock issue. This stock is for the people 
just as far as they will invest. Every dollar thus in- 
vested by the people in stock widens the margin of 
security for the bonds owned by the banks. In other 
words, the banks and money-lenders never intended to 



The Perversion of Money 49 

do more than loan money on bonds; and by "trusti- 
fying" the concern they control the earnings and there- 
by make the interest more certain, and a narrower 
margin of security may be maintained. 

The system of interest on money has already re- 
sulted in a condition so alarming that one stands 
aghast at its danger. No undertaking of any mag- 
nitude can be consummated without the consent and 
assistance of the Wall Street interests. 

The only way to relieve those interests of the 
duty of private tax-collectors is to stop traffic in the 
people's money. 

It is suicide for people to vote municipal bonds 
in the belief that they are putting money into circu- 
lation and thereby securing employment. The money 
thus earned by them is, after all, but borrowed money, 
and must be, by them, returned, every penny, with 
interest. They are simply adding fuel to the flame 
which is consuming them. They are drunkards beg- 
ging at the bar for one more drink. It gives them a 
moment's satisfaction at the price of an acute aggra- 
vation of hell's torments which are sure to follow. 
The good, if any there be, in this custom of borrowing 
money, sinks into utter nothingness when compared 
with its widespread iniquity. Money drawing unto 
itself more of its exact self, and without the slight- 
est risk, effort, or loss, is a hideous monster which 
fattens, grows strong and becomes arrogant on a diet 
of its own vomit. 

Nothing performs service for mankind without 
parting with some of its vital substance. It is this 



50 The True Function of Money 

vital substance which is converted into the material 
wealth of the world. Money parts with no vital sub- 
stance. It is merely the medium of exchange for the 
items which go to make up this wealth ; mere certi- 
ficates of deposit, declaring that the owner has a credit 
of just so much in the world's wealth, but which he 
cannot withdraw unless he surrenders the certificate. 

We, the people, are the owners of the wealth of 
the world. Money constitutes the credit-slips, or cer- 
tificates of deposit, which we use as a matter of con- 
venience and are all hoarded in the hands of money- 
lenders and the banks. These slips or certificates are, 
by law, made legal tender. We must meet our obli- 
gations with legal tender. These credit-slips or cer- 
tificates of deposit, under the present system, are more 
productive of profit than are the items of wealth for 
which they stand. The law makes it incumbent upon 
us to get them. Un'der this system we are compelled 
to borrow them, and must pay for this a ruinous rate 
of interest. 

We are told in the books that the reason why 
money should be placed in the realms of earning, or 
profit-producing commodities, is that the money-lender 
is foregoing the use of it during the period for 
which it is loaned, and that he should be recompensed 
for this forbearance ; that is to say, if he did not loan 
the money to someone, he could and would invest it 
in a way which would bring him profit. This is a 
false and unwarranted assumption. Why should we 
conclude as a fact, beyond peradventure of a doubt, 
that his investment would prove profitable, — then bor- 



The Perversion of Money 51 

row his money, do all the work, suffer all the anxiety 
and take all the chances on loss and bind ourselves 
to make it doubly sure that his money will be a win- 
ner? 

To the contrary, the professional money-lender, 
one who has done nothing through life but gain his 
substance from the people via the interest route, is 
usually unsuitable by temperament or experience to 
invest his money judiciously; and it would be a much 
more reasonable assumption that his ventures would 
be failures. Yet an idea has gone abroad that if the 
money-lender did not accommodate (?) someone with 
a loan, he surely would make as much and more by 
investing the money himself ; and a thoughtless world 
surrenders to this reasoning. 

Primarily, laborers are to be paid in that for which 
they were laboring — clothing. food. etc. — and to have 
the same delivered to their respective markets. This 
method has been found impractical, and civilized 
nations have therefore hit upon the expedient of the 
employer's giving and the laborer's accepting tokens 
of credit. These tokens are the tangible representa- 
tives of money, and it wnll be particularly noted that 
in the correct course of business they must be fully 
surrendered before any of the wealth for which they 
call will be delivered. Loaning these tokens to the 
depositary does not have the effect of gaining posses- 
ion of the wealth. The only way the employer has 
to get these tokens of credit is to borrow them, and 
he pays the laborer with borrowed money. It is a 
self-evident fact, an axiom, that a dollar borrowed re- 



52 The True Function of Money 

mains a borrowed dollar till returned to the owner, 
no matter whose nor how many hands it has passed 
through. The laborer takes this money and feels that 
it is really his. He assures himself that these dollars 
are exactly what he was laboring for, and he is aware 
that he can take them to the world's clearing-house 
and exchange them for their face value. He is con- 
tent to rest at that. He can realize only the outward 
manifestation; he cannot conceive that there is any 
trick about it. Let us see : 

Now, if those dollars were really his, and he ex- 
changed them for wealth, he would part with the dol- 
lars, accept the wealth, and have no further concern. 
This is not true of his borrowed wages. When he 
accepted those borrowed dollars in payment, he accept- 
ed them with the same demands thereon that they had 
in the hands of his employer; that is, in nine years 
to be returned, and as much more with them. When he 
exchanges them for wealth, he is still beholden to his 
employer to pay interest thereon, which we have seen 
will amount to a like sum in nine years at eight per 
cent per annum compounded. Hence it devolves up- 
on every laboring man to earn the amount of this in- 
terest every nine years and present it to his employ- 
er, that his employer may have the use of the money 
from the money-lender. 

This is the difference between laboring for a legit- 
imate medium of exchange and laboring for borrowed 
dollars. If one labors for properly invested dollars, 
he would take his pay and the transaction would be 
closed. If, however, he is laboring for borrowed dol- 



The Perversion of Money 53 

lars, he must then begin to pay interest on his earn- 
ings. 

This principle cannot be impressed too firmly up- 
on your mind. The original borrower of money does 
not propose to pay either the principal or interest him- 
self. He intends to pass that duty along to the ulti- 
mate consumer, and will make his collections by adding 
the amounts to the price of his wares. W^hen he pays 
this borrowed money to a third party, as to an em- 
ployee, for example, the employee labored therefor just 
the same as though he was earning it; when, in fact, 
he is laboring for the privilege of taking his employ- 
er's place as a borrower ; in short, he is laboring only 
for a loan. He is not really laboring for the money, 
but for the credit which the money will guarantee and 
measure. W't will assume -that he labors one day 
and receives therefor a borrowed dollar in payment. 
With this dollar he purchases a meal of victuals. Now 
as a fact, he has earned that meal with his day's 
labor. He has paid for it in full, and the transaction 
should be closed. He thinks it is. He little dreams 
that he will now commence to pay interest on that meal 
and will continue so to do as long as the debt remains 
unpaid to the original lender. This is the condition 
of the laboring man and of all consumers, notwith- 
standing that they have not borrowed, and cannot bor- 
row, a dollar directly. They are made the goat of 
that unfortunate system which can be sustained only 
upon the false conception that money is capital. The 
evil of this system is plain. The people have no voice 
as to whether the loan shall or shall not be made ; and. 



54 The True Function of Moncv 

when made, they have no say about the rate of inter- 
est to be paid. The captains of industry fix the amount 
of our loans and set the rates of interest thereon, and 
the people are bound to meet the demand. It is use- 
less to contend that this is a matter of private con- 
tract between the borrower and the lender. The 
people, the real parties in interest, are not permitted 
to be parties to the contract. 

In this respect, they are like the slaves of old, 
whose condition in that day was justified by phil- 
osophical sophists, on the ground that they were parties 
to a contract. One of these pseudo-philosophers was 
arguing to Voltaire upon the correctness of this view, 
whereupon Voltaire replied : 'T cannot believe it to be 
true, unless you show^ me a copy of that contract, signed 
by the party who is to become the slave." 

We now clearly understand that all the money in 
circulation among the people, and which they think is 
really theirs, is in fact borrowed money, owned by 
no one but the money-lenders ; further, that this mon- 
ey which the people think is theirs is bearing inter- 
est, and that the people are paying this interest, and 
that also in cash, borrowed in the same way : thus bor- 
rowing money to pay interest on borrowed money. 

"A vampire," as defined by Webster, "is a dead 
person superstitiously believed to return in body and 
soul from the other world, and to wander about the 
earth doing every kind of mischief to the living, and 
to suck the blood of persons asleep, thus causing their 
death. Hence, one who lives by preying on others ; 
an extortioner." 



The Perversion of Money 55 

Money, permitted to assume the role that it does 
under the present system, is the colossal vampire of 
today. It is not a creature of superstitious imagery, 
but is a living personification of fact. It excels the 
mythical vampire, as it does not need to remain in per- 
son while sucking the blood of persons asleep. It 
needs to be present but one year, at which time it will 
be partially relieved; and, at the end of nine years, 
working on an eight per cent basis, it will be fully 
released from personal supervision of its "industry ;" 
yet, although it is thus released, and has gone to other 
"attractive investments," the wound in the first victim 
never heals, but continues to flow its fuTI quota of 
blood, to be delivered to the vampire at certain fixed 
times. The victim dies a lonesome, lingering death, 
without gaining consciousness. 



CHAPTER VI 

THE FALLACY OF INTEREST 

THE custom of securing money against loss, and 
guaranteeing it a profit, was in olden times 
denounced as unlawful and immoral. The evils 
of the system were felt by the Jews in Old Testa- 
ment days : 

"And there was a great cry of the people, and 
of their wives* * * * we have mortgaged our lands, 
vineyards, and houses, that we might buy corn, because 
of the dearth * * * * we have borrowed money for 
the king's tribute * * * * Yet now our flesh is as the 
flesh of our brethren, our children as their children ; 
and. lo, we bring into bondage our sons and our daugh- 
ters to be servants, and some of our daughters are 
brought unto bondage already; neither is it in our 
power to redeem them; for other men have our lands 
and vineyards. * * * * I rebuked the nobles, and the 
rulers, and said unto them. Ye exact usury, every one 
of his brother * * * * \\'e after our ability have re- 
deemed our brethren — the Jews, which were sold unto 
the heathen ; and will ye even sell your brethern ? or 
shall they be sold unto us? Then held they their peace, 
and found nothing to anszi'er. Also I said. It is not 
good that ye do : ought ye not to walk in the fear of 
our God? * * * * I pray you, let us leave off this 
usury. * * * * Then said they, We will restore them, 
and will require nothing of them." — Nehemiah, 5:1-12. 



The Fallacy of Interest 57 

In those days interest in any form was termed 
usury. 

"He hath given forth upon usury, and hath 
taken increase * * * he shall surely die ; his blood 
shall be upon him." — Ezekiel, 18:13. 

Aristotle condemns interest as vicious, holding 
that money is "naturally barren," and that to make 
it "breed money" is preposterous and a perversion of 
the end of its institution, which, he declared, was to 
serve as a "medium of exchange" and not for pur- 
poses of increase. 

The Christian Church and laymen early con- 
demned the custom, and held any interest to be usury 
and against good morals. The secular law followed, 
and the taking of interest was forbidden in England 
from the reign of King Albert in the ninth century 
to the time of Henry VHL At that time, 1545, in- 
terest at 10% was permitted. Seven years later, dur- 
ing the reign of his successor, Edward Vl. interest was 
again prohibited, A. D. 1552. This was the status of 
the question till the reign of Anne, 1713, when interest 
was again legalized and the rate fixed at 3%. and it 
was not till the year 1854, during the reign of Victoria, 
that all restrictions were taken ofif and the institution 
recognized as a factor.* 

*"The first gold and silver coins were brought from 
Asia to Hellas as an article of Commerce. Gradually they 
came into use as money. After the State had commenced 
to coin its own money, for a long time there existed only a 
small amount of coined money in the land, and this was 
chiefly in the hands of the men of business and merchants. 
As soon as money ceased to be an article of trade like other 
articles coming on the market, when even the poorer classes 
could not exist without it — the laws of debt prevailing in 



58 The 1 rue Function of Money 

Today the custom has become so venerable, that 
it is accepted by the world as a thing of justice and 
right. Philosophers in political economy look upon 
the custom as founded in sound principle, and seem to 
recognize it as an essential factor in the civilized 
world. They attempt to analyze the cause and eflfect 
of high and low interest, but never seem able to de- 
tect the falseness of the foundation upon which the 
institution is builded. 

It was probably a manifestation of like shortcom- 
ings which animated Thomas De Quincey to publish 
his somewhat uncomplimentary opinion of this class 
of scientists and their works : "I saw that these were 
generally the very dregs and rinsings of the human in- 
tellect ; and that any man of sound head and prac- 
ticed in wielding logic with scholastic adroitness might 
take up the whole academy of modern economists 
and throttle them between heaven and earth with his 
finger and thumb, or bray their fungus heads to pow- 
der with a lady's fan. " As we have seen, the prime 
cause assigned for the necessity and justice of loan- 
ing money and collecting interest thereon is, that the 

the interest of the proprietors, — money, like a poisonous 
plant, absorbed and consumed the strength of the land." — 
Curtius's History of Greece. 

"Although the monarchy had been abolished, the people 
of Rome by no means enjoyed the blessings of a free gov- 
ernment. All political power was in the hands of the pa- 
tricians, and plebeians were kept in a condition of great 
social degradation. Obliged to borrow money of their rich 
neighbors, they were charged enormous rates of interest, 
and when unable to pay were delivered by the cruel laws 
to the mercy of their creditors, who deprived them of their 
lands, and reduced them to the condition of serfs or slaves." 
— Anderson's New General History. 



The Fallacy of Interest 59 

money lender is foregoing the use of the money for the 
time specified in the loan, and hence should be recom- 
pensed therefor. This idea that the money-lender is 
foregoing the use of the money is a fallacy, failure in 
the perception of which has permitted and still permits 
this gigantic trick to be played upon honest industry. 
Let us take the man who has acquired such suf- 
ficiency of money that he resolves to cease business 
strife and spend his remaining days in ease and re- 
creation. His money is in a safe-deposit box and he 
is at home, with the full determination that he will 
never again use a dollar of it in any enterprise. His 
expectancy of life is, say. twenty years. If he loans 
his neighbor one-fourth of his money for a period 
of three years, and at the end of that time the money 
is returned, then can it be said that the money-lender 
has foregone any use of the money? Or. suppose he 
has his money deposited in a checking account at a 
bank. As far as he is concerned, he has foregone the 
use of the money to the bank, for which he receives 
nothing. The banker does not forego the use of the 
money, for it is not his to use. in the first place ; and, 
secondly, the only privilege granted him by the owner 
is to loan it. That brings us to the central thought. 
The only use a money-lender has for money is to 
hoard and loan it, and the only foregoing he suffers 
is, that if he loans it to one he must forego loaning 
it to another. If he accepts one as his slave, he must 
forego the pleasure of having the other garnering 
his cotton. The money-lender never intends to in- 
vest one dollar in legitimate enterprises ; he never 



60 The True Function of Money 

foregoes the use of money in that way. Wall Street 
money, — and by that I mean what is known as bank 
money, — is held sacredly for the one purpose of draw- 
ing interest unto itself. A banker found investing 
any of this sacred hoard in a legitimate enterprise, 
i. e., any enterprise where the money must stand its 
just share of the loss, if such there be. will be shunned 
by his brethren in the fraternity, as a thing unclean. 
He will to them be a heretic and a traitorous back- 
slider, for has he not violated all the sacred canons 
of the interest-gathering creed? This cardinal pre- 
cept, of never investing hoarded money in any legit- 
imate enterprise, is more jealously guarded than any 
maxim or tenet of the most dogmatic of faiths. 

Is it not true that, should these non-conformists 
become too plentiful, the whole structure would crum- 
ble and fall? If too much of this hoarded money 
should get into the channels of trade in its proper, 
just, and fair way, i. e.. with the full and honest as- 
sumption of its share of the losses, when losses are 
in order, the time would soon arrive when no one 
woubl need to borrow from the banker, as the cause 
thereof, to-wit, the scarcity of money, caused by 
hoarding, would be a thing of the past. The world 
would be immeasurably benefited if the whole indus- 
try of foregoing were uprooted. To accomplish this, 
it will be necessary only to render the enterprise un- 
profitable. By removing the incentive in private indi- 
viduals to hoard (interest) and by refusing to money 
safe-conduct asrainst loss, it will be returned to the 



The Fallacy of Interest 61 

of legitimate trade, and the golden calf will become a 
multitude of fatted calves. 

No nation ever felt the need of buying bullion 
and coining money to the end that some of its citizens 
might hoard the same to their own use, as an instru- 
ment to exact tribute from the great mass of the 
people. No nation ever foresaw the necessity of those 
people having to pay tribute to an aggregation of pri- 
vate citizens for the use of that article which the 
government intended should flow freely as the medium 
of exchanging commodities. What could be a more dis- 
tressing phenomenon than that of an article, bought 
by the government and distributed to the people, for 
a specific purpose and for the good of all, being hoarded 
by the money-lenders and converted into a profit-pro- 
ducing commodity? This strange accomplishment is 
made possible by the fact that this metamorphosed 
"commodity" still retains the function of a legal tender. 
This is bound to produce a demand or market. This 
demand grows keener and keener, — finally distressing. 
Business cannot be carried on without this medium. 
The result is, the gross injustice of the honest toiler 
being compelled to sacrifice the fruits of his labor to 
the money-lenders for the use of that article which 
the government intended should be the prize of con- 
quest. 

That it is wrong to pervert money from its ori- 
ginal and only use to that of a profit-producing com- 
modity will be more readily understood by a simple 
illustration involving the same principle. 

Let us assume that the government has an army 



62 The True Function of Money 

stationed at St. Louis, Mo. This army constitutes, 
for our purpose, the people of the United States, and 
the officers thereof the money-lending contingency. 
The Indians of Western Montana declare war, and it 
becomes necessary to mobilize this army in order to 
quell the revolt. The supplies for the army must be 
transported. The moving of these supplies is tanta- 
mount to the moving of commodities in commerce. 
In order that these supplies may be economically 
moved, the government buys one thousand mules and 
delivers them to the army for that specific purpose. 
That these mules may be identified as government 
mules, and to provide against counterfeiting, they are 
branded upon one side "E pluribus unum," and upon 
the other "In God we trust." To make this trans- 
action complete, the government will by law proclaim 
that these mules, and these mules only, shall perform 
that function : — making them a sort of a medium of 
exchange and legal tender as it were. The officers of 
the army, by virtue of their position like unto the 
money-lenders by virtue of their acquired position, 
have charge of the mules, — are the masters of the herd 
(hoard). By an absurd custom, the origin of which 
seems veiled in mystery, it is permissible, yes, sanc- 
tioned by solemn law, for these officers to turn the 
mules into a profit-producing commodity for their own 
private gain. They see no necessity for using the 
mules freely for the moving of supplies unless they 
have their interest protected. 

Some Captain of Industry is building a railroad 
out West, and sees his way clear to borrow the mules 



The Fallacy of Interest 63 

and pay for their use, as he knows that he can pass 
the burden along to his patrons in due time. The 
officers of the army perceive the beauty of this ar- 
rangement, and they promptly proceed to loan the 
mules to the said Captain at an agreed percentage. 
Thus far this plan has been productive of exceeding 
pleasure. The Westerners will get their railroad, the 
Captain of Industry will be in a position to make them 
"pay the freight," the officers will get their principal 
and interest, and will be correspondingly rejoiced. 
The government stands by with benign approval, ready 
itself at any and all times to borrow these same mules. 
The people, the army, are supposed to look on, mys- 
tified by these masterful transactions in high finance, 
and give ithanks to these gentry, the officers, the money- 
lenders, for their gracious condescension in permit- 
ting these manifold blessings to fall alike upon the 
just and the unjust. The whole transaction is to 
them "as deep and dark as can be woven of the warp 
and woof of my.stery and death." The only tangible 
fact which the people as a whole can grasp is, that they 
are still confronted with the task of moving those 
supplies, and that they have no mules to do it with. 
There is no alternative. If they should elect to trans- 
port the supplies on their backs and toil along the 
hot and dusty roads till they reached their goal, i. e., 
carry on commerce in the primitive way. they are met 
by the fiat of the law, which asseverates that these 
mules, and these mules only, are the medium of ex- 
changee. They are, therefore, compelled to apply to 
the officers for assistance in the matter. This assis- 



64 The True Fnnclion of Money 

tance, if granted at all, is upon the officers' own terms, 
and as long as selfishness and avarice dominate the 
business world, those terms will be the limit of what 
the traffic will bear. 

That the commerce of civilized life must be car- 
rie'd forward, just as the supplies of the army, is patent. 
To be carried forward in a primitive way is impossi- 
ble in each instance. Means of economically accom- 
plishing these ends must be devised. This has been 
done, in one instance by mules, and in the other by 
money. That these mediums are to be used freely 
for the purposes for which they were created seems 
beyond doubt. Yet what a difference results! If the 
officers of the army w^ere to appropriate the mules to 
their own use, an investigation would be next in order. 
Upon conviction, dismissal from the service as being 
unfit to wear the uniform, with disgrace and imprison- 
ment, would rapidly follow. Should money-hoarders 
appropriate the money to their own use, congratula- 
tions are in order ; and when one has hoarded enough 
so that he may be classed as one of our great financiers, 
we advance him in the service as one worthy of our 
confidence and esteem. 

Money, shorn of its halo, and left to bear its own 
just losses, would soon be removed as a disturbing 
element in the aft'airs of men, and commodities would 
adjust themselves, with a fair profit to all. Men do 
not enjoy equal ability nor opportunity to acquire 
profits in the commercial world. Each, however, is 
entitled to the full benefit of his talents and opportuni- 
ties. The fruits of his industry are his, to enjoy in 



The Fallacy of Interest 65 

any manner he sees fit. It is the knowledge that in- 
dividual effort will be rewarded that animates in- 
dustry. Each individual must assume responsibility 
for his own welfare. He cannot depend upon others. 
In the conduct of our affairs, in the present day, these 
truths are ostensibly recognized, and are theoretically 
permitted to govern ; but, when submitted to a prac- 
tical demonstration, they are ignored. 

If human activities were confined to a contest 
between man anil man, each would enjoy all he could 
produce ; but under the present system the stronger 
sends his money forth to renew the struggle with the 
weaker, and thus succeeds in taking away "that which 
he hath." 



CHAPTER VII 
CONDITION OF LABOR 

ALL tangible commodities which the subject to 
exchange in commerce are created by the appli- 
cation of labor to the land and its products. 
Money does not and cannot labor. We are told that 
labor-saving machinery assists in production and is 
entitled to its share of the profits. This is undoubt- 
edly true. We are further told that inasmuch as 
labor-saving machinery is capital and can be exchanged 
for money, then money is capital ; and as, in this view, 
they both are capital, then money must be labor-saving 
machinery and entitled to share in the profits. I 
advise anyone who believes this to take a bag of money 
and with it plow his field, cut his wheat, or weave a 
bolt of cloth. His mind will become disabused. There- 
fore, no man can become entitled to the profits of 
labor-saving machinery till he has fully and completely 
severed his connection with his money and accepted 
the labor-saving machinery in return. By so doing 
he will be honestly entitled to the profits and honestly 
subjected to the losses. It is begging the question to 
say that he can loan money to another for the pur- 
pose of purchasing labor-saving machinery, and by so 
doing become entitled to profit, unless he is bound to 
share in the losses to a corresponding degree. As 
long as the machinery is operating at a profit, loaned 



Condition of Labor 67 

dollars assume the characteristics of legitimately m- 
vested dollars ; that is, dollars which have been ex- 
changed for the machinery ; but as soon as loss appears 
they suddenly lose this character and become just plain 
dollars; and yet, as such, they keep right on earnmg 
profit. This is a thing which, as we have just seen, 
does not lie within their power. 

Labor is industriously hoeing and weaving and 
sending the product to fill the coffers of this system, 
and wondering what is becoming of it. Ignorant of 
this, it blames its employers and fails to recognize that 
the employers are standing in the same position. 

It is reasoned that when a laborer receives his 
pay on Saturday night, the contents of the envelope 
are his to do with as he wishes. We will assume that 
his employer borrowed this identical money. If bor- 
rowed at eight per cent per annum, it must, if the in- 
terest is payable yearly, be returned, in twelve and 
one-half years, twofold. The employer cannot do 
this unless he can make sufficient profit from the 
products of labor. It is plain that the burden of meet- 
ing this demand is passed along, to be borne by the 
consumer. The money in the pay envelope is Jiot the 
property of the laborer. It was only borrozvcd from 
the bank, and hence still belongs to the bank. It can- 
not, in the very nature of things, belong to two indi- 
viduals at one and the same time. It came to the 
laborer impressed with the same demands that it had 
while in the hands of the employer ; that is, that this 
same money, or an equal amount, plus as much again, 
must be furnished by labor in the above period to 
meet this dem.and. This is eff'ected in the most plaus- 



68 The True Function of Money 

ible manner. The laborers of the world comprise the 
great majority of the ultimate consumers. As an 
ultimate consumer, a laborer must give back the prin- 
cipal borrowed by his employer, plus the interest de- 
manded, for the articles which he himself has pro- 
duced. His employer acts for him as a borrowing 
agent only. The interest on bonds and on all bor- 
rowed money whatsoever is not paid by the borrowers. 
If the borrowers did not know that this burden would 
be shifted to the people, they would not be borrowers. 
They knqw that they can use the product of labor to 
compel lat;>or to pay all demands. 

Some political economists describe money as 
stored labor. Probably petrified labor would be about 
as lucid. They then reason themselves into the idea 
that this stored article is brought forward and ex- 
changed for the fresh supply of today. One hundred 
years ago a man produced and marketed one bushel 
of W'heat for one dollar. The consumer paid the 
dollar, accepted and consumed the wheat. This is a 
simple and natural transaction. The producer has 
been paid in full and has the dollar, and the consumer 
has the wheat. This transaction, as far as the world 
is, or should be, concerned, is closed. Many years 
since, the producer and the consumer have been gath- 
ered to their fathers. The wheat non est. What 
possible connection could this simple transaction have 
with the world of today? In those days, as now, the 
system made it essential to do business with hired 
money. Thus it became necessary to contribute a 
tithe of that dollar to the gentleman who financed the 
transaction. This tithe, of course, fell upon the ulti- 



Condition of Labor 69 

mate consumer, and was absorbed by the money- 
lender and carefully stored away in his vault ; verily, 
ten cents worth of labor preserved, or, commercially 
speaking; canned. This process has been repeated 
upon an ascending scale, till this money-lender, or his 
progeny, now have a warehouse full of canned goods. 
The system still makes it necessary to do business 
with hired money. Before labor of today can be ex- 
pended, it is essential to call upon this store of petrified 
labor. This ossified article wall not permit fresh labor 
to exist without exacting the lion's share of the profits 
of the fresh labor's production. This profit is, in turn, 
hoarded as canned labor, to be used in ages to come 
for the same purpose. Labor, in all honesty, which 
was performed ages ago cannot be crystallized and 
brought forward in the shape of a silver dollar and 
made to labor again. The labor that produced that 
sack of wheat was paid in full and has gone forever. 
How absurd to conclude that any part of it could be 
brought forward to the present day and again demand 
pay ! Stating the proposition is its own refutation. 
Verily, fresh labor, once expended, is gone forever ; 
the canned article is indestructible. Fresh labor is 
perishable and must be marketed each day ; the canned 
goods keep. The perishable article is in the hands of 
the laborer; the preserved article is in the hands of 
the money-lenders. The fresh article can be bought 
and paid for ; the canned specimen can be paid for, 
but never bought 

The erroneous idea of the function of money is 
what leads to all the illogical reasoning about its 
rights. The unjust acts which money commits are 



70 The True Function of Money 

directly traceable to the fact that it has been kept out 
of its true sphere. Take it out of the position of being 
a profit-producing commodity and permit it to be itself 
— a law, a function — an'd it will never again "perform 
such fantastic tricks before high Heaven as make the 
angels weep." The present perverted use of money 
leads to but one result — the increasing wealth of the 
few, and the deplorable poverty of the many. We 
are prone to conclude that this system of loaning 
money for profit is one which does not concern us, 
unless, perchance, we are one of the actual borrowers. 
We feel that by being saving and frugal, and living 
strictly within our means, we may escape the necessity 
of becoming actual borrowers. We thus imagine that 
we are fortuntae, and that the system, be it ever so 
iniquitous, is visited upon others ; and although they 
have our sympathy, we can do nothing for them, as 
it is an aft'air peculiarly their own. This conclusion 
is the result of a superficial understanding of the 
question. Every dollar borrowed in this world is a 
debt passed along to the ultimate consumer, and you 
are one. Although you may refuse to borrow money 
'lirectly. you have many others borrowing for you. and 
you will pay the debt and all the interest as long as 
you are a consumer. To escape it. you must refuse 
to consume — starve, go naked, use no convenience of 
life whatsoever ; and you do not yet escape it. Your 
governments, national, state, county, and city, are 
industriously borrowing for you and pledging your 
labor in payment. You must leave your native land 
and seek a desert isle. You must renounce the 
civilized world and all its ways before you can have 



Condition of Labor 71 

any hope of escaping these burdens laid upon you 
by others. 

The question of the unemployed is becoming 
serious. In the last few years it has been growing 
more and more clamorous for attention. As our 
present privately-owned banking system becomes more 
perfectly organized, and its power centers in fewer 
hands, the predicament of the unemployed becomes 
more acute. The two are closely connected, — evi- 
dently a cause and an effect. Civilization, among 
other things, consists of a ready and easy method 
of exchanging credits. This is accomplished by 
the use of money, a medium of exchange. No money, 
no exchange ; no exchange, no business ; no business, 
no employment ; no employment, — and we have 
the problem of the unemployed. No one knows 
better than the bankers that the banking system 
is in complete command of the industrial world. 
Without thought or investigation, people concede 
this tremendous power as a matter of right. There 
are some, however, who realize that the assumed 
right to this all-controlling power is unfounded. Like 
the hitherto accepted doctrine of the divine right 
of kings, when sifted to the bottom it is found to 
rest upon sand. 

The idea that money is a commodity that can 
be owned and manipulated, as such, by private indi- 
viduals, brings the control thereof into the hands of 
the privately-managed banking system. The banks 
are thus using a public function as private property, 
and, at will, harassing and destroying industry and 
unexpectedly throwing people out of employment 



72 The True Function of Money 

by periodically contracting the volume of money 
in circulation. Unemployment in an individual is 
unnatural, and when general is abnormal. In the 
very nature of things, there can be no periods of 
unemployment. Our daily demands are the same 
one day with another. We eat, wear and use as 
much one day as another. It requires an even flow of 
production to supply this even flow of consumption. 
Were things left to take their natural course, pro- 
duction and consumption would maintain a uniform 
ratio and periods of business depression would be 
unknown. 



CHAPTER VIII 
CONDITION OF CAPITAL 

MONEY is an essential factor in the eco- 
nomical consummation of a complex ex- 
change. It is the medium by which the 
items which constitute the world's wealth and credit 
are economically exchanged, one for the other. It 
has no other legitimate use. To fulfill this function, 
an exchange contemplates full and complete mutual 
surrender of the title in both the money and the 
commodity. Any exchange wherein the title to the 
commodity is surrendered, and that of the money 
is not, is abortive. It is the first link in that chain 
of unfair advantage which money enjoys. One 
who borrows money for profit is one who hopes 
to share in this unfair advantage. He is alike culp- 
able with him from whom he borrows. The bor- 
rower exchanges dollars to which he has no title 
for commodities, and thereby acquires title to the 
commodities. The one with whom he exchanges is 
deceived in the belief that he is acquiring title to the 
money. He is not. He is only borrowing it and 
must return the principal, every dollar, and further, as 
a consumer, pay his share of the interest thereon. 
The principal must be returned, — the very same 
dollars which were borrowed. (Any argument that 
they are not the identical dollars is futile ; it is only 
begging the question.) The interest is to be paid 



74 The True Function of Money 

from the products of labor, which products must 
first be exchanged for cash. As all the cash, the 
principal of this debt, must be returned in order to 
pay the debt, it becomes necessary to exchange the 
products for more borrowed money in order to 
meet the interest on borrowed money. There is 
no end to it. 

I assert, without fear of successful contradiction, 
that it is a physical impossibility to pay interest 
on money according to the terms of the agree- 
ment. Any borrower who thinks this can be 
done is deceiving himself. His only possible avenue 
of escape is to borrow money to pay interest, and 
that from the same party from whom he borrowed 
the principal. This proposition will be astounding 
to the uninitiated. When anyone makes a loan, the 
borrower agrees to return the same amount of money 
which he borrowed, together with interest, which is 
also to be paid in money. It is evident that the 
borrower must get back, through the channels of 
trade, the exact amount of money which he had dis- 
tributed. In addition thereto, he must acquire suffi- 
cient money to pay the interest. Assuming that all 
the money in the world amounted to one million dol- 
lars and was equally distributed among the inhabi- 
tants thereof, and that a coterie of gentlemen had em- 
braced the advantages of the loaning system and had 
persisted, as they have to the present day, until 
the system had become a perfected machine and in 
control of all this money — we will then observe the 
following : The bankers and money-lenders will make 
a loan of one million dollars, payable in one year 



Condition of Capital 75 

with interest. This identical million dollars must 
at that time be returned. \Vhere can the borrower 
get the interest? He cannot produce money, as that 
is a function of the government. His only recourse 
is to apply to the ones from whom he originally 
borrowed for another loan with which to pay the 
interest. There is no escaping the conclusion ; the 
only way to pay interest on money is to borrow 
more money for that purpose, and that from the 
same persons to whom the principal is owing. This 
in turn increases the people's debts to the billions 
of today, and upon which they are compelled to re- 
borrow the same money, over and over again, with 
which to pay the interest thereon. 

This interest system is an endless chain of dis- 
aster with which the people are afflicted, and no 
ray of hope will ever cheer them until sufficient 
of the thoughtful and fearless ones have led the 
world into the light of understanding its true nature. 
Under the present system it is not a question of 
ability or willingness to produce that circumscribes 
our temporal needs. All endeavor along these lines 
is nullified by the fact that producers of necessary 
commodities of life are unable to exchange their 
products. This is the result of the lack of that 
essential medium — money. 

We now clearly perceive that the control of 
money is the control of production, that the control 
of production is the control of business, and that 
the control of business by a handful of money- 
lenders and bankers is disaster. The producing and 
commercial world of today is an exact replica of a 



76 The True Function of Money 

steam plant, such a one as now furnishes power 
to carry on the various industries of the world. 
Let us select a great ocean steamer as she launches 
forth upon the sea (of commerce) to perform her 
functions in the world's activities. The safe trans- 
port of ship and cargo from port to port, from pro- 
ducer to consumer, is the task to be performed. Her 
engine is the capital, and the steam in the boilers 
is the labor with which this is to be accomplished. 
These forces, standing separately, are powerless. 
In order to get results, there must be devised a 
medium of exchange, a method by which these two 
forces may be economically united. This link is 
easy of discernment and simple in construction. 
A comparatively small pipe known as the steam 
line (the medium of exchange) connects the boilers 
with the engine ; and the passage of the steam through 
this line is controlled by a valve therein called a 
throttle (the banks). Thus the enormous energy 
in the boilers and the immense capabilities of the 
engine will become efficient, both as to time and 
quantity, at the will of the engineer (the banker). 
The engineer can, with the slightest effort, permit 
that vessel to be propelled by thousands of horse- 
power, or with very few, or shut off the power 
entirely. This he can do by virtue of the fact that he 
has control of the medium of exchange. During these 
various changes the volume of energy in the boilers 
has not diminished ; in fact, it increases to a point 
of danger, averted only by a safety-valve; the 
capabilities of the engine remain intact, but their 
eft'icient co-operation has been rendered impossible 



Condition of Capital 77 

by the closing of the steam line. In the meantime, 
the vessel thus rendered helpless drifts relentlessly 
toward the tumultous seas of the shoals of bank- 
ruptcy. The captain and the owners of the vessel 
are horror-stricken. The impending disaster to 
their enterprise has unnerv^ed them. They apply to 
the engineer for relief. He tells them that the 
cause of the condition of affairs is that he has 
become timid, as the boat had been running along 
too smoothly. He could also ascribe the difficulty 
to the fact that someone had been "meddling with 
his business," or "tinkering with the tariff." 

Their supplications are in vain. The engineer 
remains obdurate. One by one they are devoured by 
that tempestuous sea of bankruptcy, and no one 
remains but the engineer and his minions, who 
have played the heroic part of the boy who "stood on 
the burning deck". Yet, unlike the boy. they knew that 
they were masters of the situation at all times. They 
are now owners of the entire enterprise. The time 
to act has arrived. The engineer, by a slight turn 
of the wrist, opens the throttle, thus permitting the 
medium of exchange to perform its function ; labor 
and capital again unite ; the great vessel steers for the 
open sea and comes proudly into port, bedecked 
from topmost peak to waterline with flags fash- 
ioned from the front pages of the daily press, 
each bearing a legend proclaiming the return of 
prosperity. We, the people, go home, bolt our simple 
dinners, and hasten down to the opera house to hear 
our congressman tell us about what he did to bring 



7S The True Function of Money 

these glorious events to pass, and how fortunate 
we are to have in our midst an engineer of such 
sterhng and transcendent qualities. This picture is 
too beautiful to mar. Let us not sully our memory 
by any reference to the host of black and bloated 
remains that are, at this instant, being ruthlessly 
tossed about out there on those boisterous shoals 
of bankruptcy, the innocent victims of the engineer's 
groundless timidity or lack of confidence. Let us 
draw the veil. Until sufficient of the thinking people 
of the world see and understand the incontrovertible 
analogy which exists between the open sea of the 
foregoing illustration and the sea of commerce ; 
the vessel sailing the open sea and a business enter- 
prise ; the boiler and engine of the vessel and labor 
and capital ; the steam line and money ; the throttle 
and bank, and the engineer and banker — we will 
continue to take our text from the daily press, our 
modern gospel, and listen to the sermons of our 
congressmen, our modern preachers ; and, being thus 
at peace with ourselves and our modern god (of 
Mammon), we will promptly proceed to outfit another 
vessel and send her forth in high glee, and the best 
of cheer, with the same old engineer in command 
of the same old throttle ; and, although we can- 
not bring ourselves to believe it, we may well expect 
to have the same old results. 

As a natural law the amount of consumption 
sets the speed-limit for production ; but under our 
present system this condition does not obtain. There 
is no fixed and definite limit. Business can onlv 



Condition of Capital 79 

guess at the proper speed for today by consulting 
that of yesterday. The control of this matter is 
in the hands of the bankers, who arbitrarily set the 
pace for the day — and that very late in the afternoon. 
One fine day the business world starts on its daily 
round. Everybody is in high glee and their cars 
go humming along. They have consulted the speed 
laws of yesterday and hope they will remain the 
same today. They are doomed to disappointment. 
The bankers, observing that it will be to their interest 
to lower the speed limit, see, or at least pretend to 
see, imminent danger to all the good people out 
there traveling at that breakneck speed of the yes- 
terdays, and they solemnly and prayerfully lower 
the speed-limit almost to the vanishing point (call 
in all outstanding loans and refuse to make any 
more). The business men are in trouble. Not 
knowing what the speed-limit was to be, they had ex- 
ceeded it and thus broken the law. They are placed 
under arrest, their cars are confiscated, and they are 
miles from home and broke, — a sorry plight. The 
question of the unemployed is now present. As the 
business men near home they find the bankers ready 
to welcome them. These oracles of economics dilate 
on the unfortunate circumstance, blame the reckless 
disregard of the law, and assure the man of business 
that the awful bogey of over-production, or some- 
thing just as hideous, is to blame for it all. An 
august committee is appointed and those bogeys are 
due for another investigation. The notion that money 
is capital is false ; and the notion that it is an 



80 The True Function of Money 

especially favored type of capital which knows 
no law of loss is unfounded in the law of nature. 

The phenomena of the rich growing richer, 
and the poor growing poorer, and of panics, industrial 
depression, enforced idleness and hard times, we 
have thus approached from the side of cause and 
traced to effect, and have then retraced our steps 
from effect back to cause. The way is cleared of all 
obstruction. The chain of evidence is complete. The 
cause of the bubonic plague of industry is as minute 
and unsuspected as was that innocent-appearing 
flea on that equally as innocent-appearing rat, and 
yet what potential engines of destruction they are! 
The error of conceding money to be a commodity 
subject to private ownership and control, and grant- 
ing to it all the rights and emoluments of capital, 
is the bubonic flea of industry and commerce. Capital 
is existing in an atmosphere of continual apprehension 
and fear. It has no way of warding off disaster, 
as the cause thereof is at the will and caprice of 
those who control its ability to function — those 
who control the money. 



CHAPTER IX 
WEALTH AND CAPITAL 

THE GREAT and as yet unsolved problem of the 
world is, what is the cause of the wealth of the 
few and the poverty of the many? Why does this 
phenomenon become more and more manifest as 
communities and nations advance and wealth and 
population increase? The older and more wealthy 
any community becomes, the sharper the line is 
drawn, till, in the centers of wealth and population, 
we find the few wealthy beyond dreams and the 
many existing in abject poverty. Everywhere one 
goes he sees this condition in a greater or lesser 
degree, being less manifest in sparsely-settled com- 
munities, and increasing in rigor as wealth is 
produced and population increases. We have here 
a very evident effect, and hence there must be a cause. 
To discover this and remove it is the duty which self- 
preservation imposes upon mankind, for it is an 
effect which unless prevented will engulf the world 
sooner or later. Where the wealth-producing power 
is the greatest there also will be found the greatest 
poverty of the masses, and the all-pervading cry of 
hard times is heard in the most despairing wail. 
Some scientists are content to ascribe this condition 
to over-production. The fallacy of this is evident. 
Were it true, this very over-production would refute 
the plea of hard times, for who could complain if 



82 The True Function of Money 

they had more than they could use? A great many 
other reasons are proffered which are on a par 
with the over-production theory. That labor and 
industry are not getting their share of wealth is 
evident ; that all the surplus above a bare existence 
is being absorbed in other quarters there is no doubt, 
for we have daily manifestations of this same sur- 
plus, and this not by the laboring classes. 

This legerdemain, this acquiring of the surplus 
of wealth produced by labor, has mystified the 
scientists, has led them along vastly different lines 
of investigation, and caused them to arrive at a 
multitude of different conclusions. To find the 
underlying cause of poverty, we need not look to 
the producers of wealth. We have seen that pro- 
ducers, apart by themselves, will apply their labor 
to the soil and the products thereof, and all live in 
peace and plenty. It is not till their intercourse be- 
comes complex that the few begin to mount, and the 
many begin to descend the ladder of want. At this 
juncture, then, we are to find the mysterious force 
which causes this phenonenon. Here we are to find a 
new element injected into commercial transactions. 
As the wealth increases, and the complexities of 
commerce become greater, we shall see that this 
element is more and more in profusion, spreading its 
virus and opening the breach, till we reach the 
centers of commercial complexity, where the phe- 
nomenon has produced its greatest demonstration ; 
and we find, as a result, enormous wealth and des- 
pairing poverty, one upon the upper and the other 
upon the lower of those two roads which parted at 



Wealth and Capital 83 

the first point of a complex exchange of commodities. 
As the only new element injected at the point of 
complex exchange is money, this in some way must 
be connected with the force which works such dis- 
aster to the producer of wealth. 

Yet. we have seen that money is an essential 
factor in the economical consummation of a complex 
exchange. Hence it cannot be that the harm lies in 
the use of money in that capacity ; it must be in the 
use of money in some other capacity, amounting to 
an abuse, which causes this wide-spread distress so 
evident. Taking the cue that this distress springs 
from an abuse of money, we must, in order to dis- 
cover this abuse, ascertain and define the boundaries 
of the legitimate sphere wherein money can act. 
It is only by this knowledge that we can apprehend 
its perverted use. For a correct understanding of 
the true province of money, it will be necessary 
for us to understand the meaning of the terms 
"wealth", and "capital". I will not enter upon an 
extended discussion of the definitions of these terms, 
as this is not necessary, but will be content with the 
accepted principles as laid down by the masters : 

"The real wealth, the annual produce of the 
land and labor of the society." Wealth of Nations, 
\'ol. I. p. 4; by Adam Smith. 

"Wealth consists of objects of value only." 
Science of Wealth, book I, p. 8; by Professor 
Amasa Walker. 

"\Vealth might therefore be defined as com- 
posed of things that possess value." Principles of 
Economics, chapter I, sec. 4; by Seligman. 



84 The True Function of Money 

"Wealth, as alone the term can be used in politi- 
cal economy, consists of natural products that have 
been secured, moved, combined, separated, or in 
other ways modified by human exertion, so as to fit 
them for the gratification of human desires." Pro- 
gress and Poverty, book I, p. 40; by Henry George. 

These definitions clearly convey the idea that 
any item defined as a factor of wealth is so included 
because of the value created therein by virtue of labor 
expended thereon, and, further, that said item when 
thus prepared must contain the capabilities of grati- 
fying human desires. Money can in no way conform 
to these requirements. 

The various definitions of capital are as follows : 

"That part of (a man's stock) which, he expects, 
is to afiford him this revenue, is called his capital." 
Wealth of Nations, book II, chapter I ; by Adam 
Smith. 

"Capital is that part of the wealth of a country 
which is employed in production, and consists of 
food, clothing, tools, raw materials, machinery, etc., 
necessary to give eflfect to labor." Principles of 
Political Economy, chapter V ; by Ricardo. 

"The capital of a nation really comprises all 
those portions of the produce of industry existing 
in it that may be directly employed either to support 
human existence or to facilitate production." Notes 
on Wealth of Nations, book II, chapter I ; by Mc- 
Cullough. 

"Whatever things are destined to supply pro- 
ductive labor with the shelter, protection, tools and 
materials which the work requires, and to feed 



Wealth and Capital 85 

and otherwise maintain the labor during the process, 
are capital." Principles of Political Economy, book 
I, chapter IV; by John Stuart Mill. 

"The word capital is used in two senses. In 
relation to product, it means any substance on which 
industry is to be exerted. In relation to industry, the 
material on which industry is about to confer value, 
that on which it has conferred value ; the instruments 
which are used for the conferring of value, as well 
as the means of sustenance by which the being 
is supported while he is engaged in performing 
the operation." Elements of Political Economy, 
book I, chap. I ; by Professor Wayland. 

"The common sense of the term is that of 
wealth devoted to procuring more wealth." Progress 
and Poverty, book I, chapter II ; by Henry George. 

It appears from these definitions that capital 
must, as an essential fact, be a part of wealth. As 
Henry George, in his Progress and Poverty (book I, 
chapter II) so aptly expresses it: "Now, as capital 
is wealth devoted to a certain purpose, nothing can 
be capital which does not fall within this definition 
of wealth", and further, on the same page, "But 
though all capital is wealth, all wealth is not capital. 
Capital is only a part of wealth — that part, namely, 
which is devoted to the aid of production." 

It is evident that money, to be capital, must also 
be wealth. That it is neither, we have but to consult 
the following authorities : 

"Money is no more synonomous with capital 
than it is with wealth. Money cannot in itself per- 
form any part of the office of capital, since it can 



86 The True Function of Money 

afford no assistance to production." Principles of 
Political Economy, book I, chapter IV, section I ; 
by John Stuart Mill. 

"Wealth is not money. Wealth is money's 
worth, but wealth and money are by no means 
identical." Principles of Economics, chapter I, sec- 
tion 7 ; by Seligman. 

"That this universal truth is so often obscured, 
is largely due to that fruitful source of economic 
obscurities, the confounding of wealth with money." 
Progress an^d poverty, chapter III, page 60; by 
Henry George. 

"Capital must not be identified with money, al- 
though it is expressed in terms of money." Princi- 
ples of Economics, page 115; by Fetter. 

"First of all, we must not make the mistake of 
confusing money with wealth. We have seen that 
wealth is different from and bigger than money. 
Yet it is astonishing how easy it is to forget this 
simple fact." Why the Dollar is Shrinking, chapter 
II, page 15; by Irving Fisher. 

The statements of the distinguished authorities 
just cited are clear and concise. There can be no 
misunderstanding of their words, nor doubt as to the 
meaning they convey. Other authorities could be 
cited to the same point. You will hardly believe me 
when I tell you that, notwithstanding the great 
fact thus so clearly enunciated, all the above authors 
in their learned works on this interesting subject 
invariably treat of money as being included in both. 
wealth and capital. I cannot account for this ex- 
cept upon the hypothesis, that, the true function of 



Wealth and Capital 87 

money having escaped them and not knowing its 
correct status, they had no alternative. Had 
they realized that that entity known as money was a 
creature of law. and that the free and untrammele'd 
circulation of that entity was the proper functioning 
of that law, they would not have permitted themselves 
to be so inconsistent. They would have then under- 
stood the reason why money can never be either 
wealth or capital. The great truth that money is 
not capital is rapidly gaining ground, and it will 
impress itself more and more as the world recognizes 
the colossal wrongs which money has committed, 
and still commits, in the name of capital. 

"Increase in the amount of bonds, mortgages, 
notes, or bank bills cannot increase the wealth of 
the community that includes as well those who 
promise to pay as those who are entitled to receive. 
The enslavement of a part of their number would 
not increase the wealth of a people, for what the 
enslavers gain the enslaved would lose. Increase 
in land values does not represent increase in the 
common wealth, for what land owners gain by 
higher prices, the tenants or purchasers, who must 
pay them, will lose. And all this relative wealth, 
which, in common thought and speech, in legislation 
and law. is undistinguished from actual wealth, 
could, without the destruction or consumption of 
anything more than a few drops of ink and a piece 
of paper, be utterly annihilated. By enactment of 
the sovereign political power, debts might be can- 
celled, slaves emancipated, and land resumed as the 
common property of the whole people, w^ithout the 



88 The True Function of Money 

aggregate wealth being diminished by the vakie of a 
pinch of snuff ; for what some would lose others 
would gain. There would be no more desitruction 
of wealth than there was creation of wealth when 
Elizabeth Tudor enriched her favorite courtiers by 
the grant of monopolies, or when Boris Godoonof 
made Russian peasants merchantable property." 
Progress and Poverty, book I, chapter II ; by Henry 
George. 

Mr. George here expounds a great principle. 
Every word of the foregoing reasoning is true. The 
only criticism which can be offered is that he failed 
to apply this great principal to money. He specifi- 
cally excepts bonds, mortgages, notes, and bank bills 
from the category of wealth, on the ground that they 
"include as well those who promise to pay as those 
who are entitled to receive." The wealth of the 
world would not increase, "for what some would 
lose others would gain." 

For the purpose of drawing a comparison let 
us select notes from the list of items excepted from 
wealth by Mr. George. The reason why notes are 
excepted is clearly that they are but evidence of the 
fact that the holder thereof has parted with the 
amount of money stipulated in the note. For the 
purpose of this comparison we will assume that the 
money is wealth. Now, so much wealth has changed 
hands ; the lender has parted with it temporarily, 
while the borrower has acquired it in the same way. 
The note given is mere evidence of the transaction ; 
it is not wealth itself, but can be exchanged for 
wealth. The holder of the note can negotiate the 



Wealth and Capital 89 

same for its face value, and by so doing be in the 
same position that he was when he started. In this 
particular case, then, the note has performed all 
the functions of a medium of exchange. All that 
the note would need is a legal enactment making it 
a medium of exchange and legal tender, upon which 
it would have all the qualifications of money. A 
law like this would add no wealth to the present 
stock. There has been no labor performed on the 
note with the vieiv of gratifying a human desire. 
Even in these circumstances, i. e., being a medium of 
exchange and legal tender, the note would not be 
wealth, and, consequently, could never be capital. 
Money, our present medium of exchanges and legal 
tender, is no more and no less than a note — mere 
evidence of the fact that the owner thereof has a 
credit in the stock of the world's wealth which he 
may withdraw at any time upon surrendering his 
credit-slip, his money. Should he do this, there has 
been no more wealth created than when the note 
was given. The real wealth, food and clothing for 
instance, has but changed hands. The seller has the 
money — the note — and in order to be placed in the 
same position that he was on the start, he must 
negotiate the money — buy other food and clothing. 

In short, money is not wealth. It is mere evi- 
dence of credit in the world's stock of wealth; and 
under a sane and honest law this evidence must be 
fully surrendered before the holder can withdraw 
his deposit. As money is not wealth, then it can 
never be capital. Not being capital, it is an usurper 
in the field of profit-producing. 



90 The True Function of Money 

If we could imagine the real wealth of the 
world (a quantity hard to define, but which every one 
knows to be those things created by labor in order 
to gratify human desires) piled on one side, and the 
money of the world on the other, we can clearly 
see that the destruction of all the money would in no 
way affect the wealth. Pebbles could be made a 
medium of exchange and legal tender, and the world 
would be none the loser. We have, then, discovered 
that abuse of money which first becomes manifest 
when money is called into use as an essential 
factor in the economical consummation of a complex 
exchange, to-vvit : it is allowed to simulate capital 
and thereby earn ]:>rofit under the name of interest, 
when in truth and in fact it is not capital, for it 
specifically provides that it will bear no loss occa- 
sioned in any venture. As the exchange of com- 
modities becomes wider and more complex, the 
greater is the abuse of money ; the results of this 
abuse become more and more manifest, till the cen- 
ters of population and the complexities in exchange 
are reached. Here we are confronted with con- 
ditions which have perplexed philosophers from time 
immemorial — the great wealth of the few and ex- 
treme poverty of the many ; and this in our own time in 
the midst of plenty, and when the powers of pro- 
duction Avere never greater. 

A great many theories as to the cause of this 
condition have been advanced ; but I am constrained to 
believe that the abuse of money, by thus permitting it 
to usurp the function of capital, is the most virulent 
and active poison, and is by far the greatest cause 



IVealth and Capital 91 

of the diseased condition of the industrial world. 
It is the money-lenders — those fortified against loss 
and assured of gain — who take the upper road ; 
and the laborers — those fortified against profit and 
assured of loss — who take the lower road. There 
can be no doubt about this, for at the ends of the two 
roads will be found these two classes — the banker 
in his palace and the laborer in his hovel. 

We have seen that wealth is composed of arti- 
cles created by labor to satisfy the desires of human- 
ity. Labor expended upon an article which does not 
do this is labor lost, and that article is no part 
of wealth. Thus labor may be expended in carry- 
ing a load of rocks from one city to another and 
back again ; this process adds nothing to the world's 
w^ealth ; although the labor has been expended, it 
is useless, and the product thereof cannot become 
wealth, and hence can never be capital. Yet, by an 
enactment of the sovereign power, these rocks may 
be declared the medium of exchange and legal 
tender, and thus convert this useless labor into a 
means whereby the honest producers of wealth 
must share the products of their labor, and receive 
nothing in return. The production of gold and 
silver is one of those useless occupations which do 
not create wealth. It is not performed by the miner 
with a view of adding to the world's wealth. If 
his commodities were to be left to the standard of 
all other commodities and be subservient to a market 
commensurate with a demand therefor in the trades 
and arts, he would be a producer of wealth ; but 
he does not do this ; the use of his wares in the 



92 The True Ftinction of Money 

trades and arts is infinitesimal when compared with 
the real object of their production, to- wit : to take 
them to the mint and have them coined, not into 
wealth, but into tokens of wealth — credit-slips — which 
he can take to the nearest store and there exchange 
this assumed credit for true wealth. 

With the exception of the money-lending indus- 
try, there is probably none other so useless as that 
of mining for gold and silver, — ^that Is, for any 
purpose other than as commodities. To illustrate the 
uselessness of gold and silver mining to the world 
at large, let us apply the principles in a simpler 
form : I am a miner and I have a secret cave 
which contains a certain kind of pebble. I take 
a number of these pebbles and have them declared 
the medium of exchange and legal tender by law. 
There are a thousand men busily engaged in hoeing 
and weaving, and all other industries which pro- 
duce wealth. In exchanging their commodities, their 
transactions become complex, and in order economi- 
cally to consummate them, they must have some 
of my pebbles. To get them, were they used in their 
legitimate capacity, they must exchange with me 
and give me some of their wealth, for that essential 
factor in my hands. If they part with some of their 
wealth and I get it, then it must be that they have 
less wealth and I have more. I had no wealth. I 
would have nothing to eat nor wear if it were not 
that the law compels my fellow-men to get my peb- 
bles and share their wealth with me. My pebbles are 
useless to them, except as credit-tokens ; my pebbles 
do not add to the wealth in their hands ; but, in 



IVealth and Capital 93 

order economically to exchange the wealth they have 
produced, the law demands this course. When I have 
exchanged all my first instalment of pebbles for 
wealth and have consumed the same, I, being a non- 
producer of wealth, find myself in the same position 
I was in at the start — nothing to eat and nothing 
to wear. The pebbles, however, are in the channels 
of trade performing their true function. A parity 
exists between the amount of pebbles in circulation 
and the commodities in exchange ; that is to say, one 
pebble has been accepted as the token of so much of 
any given commodity, and it is well understood how 
many pebbles must be added to any certain transac- 
tion in order to maintain a balance. The producers 
require no more pebbles in their business. Left 
to their own inclinations, they v.ould not give any 
more of their wealth for pebbles. Having enough, 
they desire no more. 

But how about me? I am a non-producer of 
wealth, and still have nothing to eat and nothing 
to wear. My avenue of escape is open. Ignoring 
the fact that the producers of wealth have no 
desire for more pebbles, I repair to my secret cave 
and reappear with a second instalment. Clearly, I 
have not added to the world's wealth by this act; 
but, nevertheless, I am again in a position to foist 
this second instalment of pebbles upon the producers, 
contrary to their desires ; and in so doing oblige 
them again to share their wealth with me. This 
process will continue so long as my cave will produce 
pebbles. 

Let us further consider those thousand pro- 



94 The True Fiiuciioit of Money 

ducers hoeing and weaving and contributing to the 
world's wealth, and me with my first instalment 
of pebbles. — the medium of exchange and legal tender 
We now advance to the point where it is necessary 
for the producers to acquire some of my pebbles, 
as they must by law take them in exchange for their 
credits, and must also meet their obligations with 
legal tender. Falsely conceiving that my pebbles 
are wealth, and hence can be converted into capital, 
and as capital become entitled to earn profit or 
interest, I immediately detect the importance of 
hoarding my capital, so that I will always be in con- 
trol thereof. I say to the producer, "I do not wish 
to exchange my certain profit-producing capital for 
your uncertain capital. However, if you will pledge 
your capital that my capital will be returned to me 
at a fixed time, with the full earnings as capital, I 
will loan you the amount you ask." 

I can thus participate in the world's wealth 
and not lose an iota of my capital. This is even 
better than my former position, for now my capital is 
not in the slightest danger of being lost or even 
lessened. On the contrary, it will surely acquire 
unto itself all the world's wealth ; for is not this 
wealth pledged to the fulfillment of this very end? 
Formerly, I was haunted with a great unrest lest 
my cave failed ; but now I am free from that care 
and I see my way clear to shift that unwelcome 
feeling to the producer. It is this false idea, that 
you can "eat your cake and keep it too", that leads 
to such disastrous results as are grinding all hope 
from the existence of the masses. 



CHAPTER X 
THE MONEY QUESTION 

THE MONEY question has been a theme for 
political discussion for ages, and is still an 
unsolved problem. That there is something 
wrong with our present system of distributing wealth, 
is evident. The unequal rewards to money on the 
one hand, and to labor and capital, on the other, are 
recognized at a glance. It is evident that some re- 
fractory malady taints our industrial activities. It 
breaks out at the most unexpected times and for no 
apparent reason. The first indication of an attack 
of the malady is stringency in money, industrial 
depression, and general confusion. These symptoms, 
if not checked, rapidly develop into the more alarm- 
ing forms of panics, enforced idleness, and bank- 
ruptcy. This condition soon results in a general 
debility known as "hard times". The attacks 

occur with noteworthy regularity. It would seem 
that they were brought on and controlled by human 
intelligence. Another noteworthy fact is. that it 
matters not what may be the stage of the malady, 
the phenomenon of the rich growing richer and 
the poor growing poorer is ever active. This is 
hard to understand. The world is full of plenty, 
we have abundance of willing workers to garner the 
same, and we are constantly improving our means 
of production. 



96 The True Function of Money 

A great many theories as to the cause of this 
trouble have been advanced ; but, so far, none of 
them have proven substantial. They are but vain 
gropings in the dark for an outlet. Our present mone- 
tary system has been under suspicion ; but, owing to 
failure in understanding the true function of money, no 
very logical conclusion has been evolved. The history of 
the various steps in the evolution of money does 
not concern us. All the charges and counter- 
charges, which at times have been bitterly acrimoni- 
ous, have been fully and ably argued on each side 
before that great jury, the people, with the re- 
sultant verdict that we have now adopted the gold 
standard and our present banking system. 

A fair and candid statement of the result of 
this verdict is, that the same malady still exists, and 
that its cause is as yet undiscovered by the masses. 
In the diagnosis of the case the symptoms were 
misinterpreted; and the remedies applied proved 
inadequate. We must re-diagnose and discover 
the cause of failure. The first symptoms of disorder 
do not in any way indicate a constitutional weakness, 
but, to the contrary, give unmistakable evidence 
of local disturbance. Some particular organ be- 
comes deranged, and, if permitted so to continue, 
will soon spread its poison to other organs, and 
thus the whole structure become diseased. Further 
proof that the malady is local in its incipiency lies 
in the fact that it quickly responds to treatment, 
no matter at what stage. Under this treatment the 
entire system seems to undergo a complete change, 
and, like magic, becomes what seems to be a sound 



The ^loney Question 97 

and healthy whole. Still, for some mysterious rea- 
son, while thus enjoying the best of health, this 
elusive organ will again become deranged and will 
continue to spread its poisonous virus with ever-in- 
creasing malignancy, luitil again checked by this 
treatment (permitting the volume of money in cir- 
culation to become normal). The spectacle of the 
periodic return of this malady, and of its yielding 
to this mysterious treatment, is familiar to all. It 
is our duty to discover the cause of this disturbance 
and to remove it. 

Money, as the medium of exchange, will per- 
force assume a certain ratio to commodities. The 
unit of money will assume a certain relative position 
to the unit of any given commodity. Thus, we say 
a bushel of wheat is worth a dollar. Now, we do 
not mean that a dollar in money is of the same value 
as the bushel of wheat ; that would be absurd, 
for we know that a dollar in money is of no value — 
that is, of no value over and above its bullion value 
when placed upon the market as a simple commodity 
and not stimulated by the coinage law. What we do 
mean is, that a bushel of wheat is worth just the 
same as any other amount of any other commodity 
which we say is worth one dollar. Just as we say 
a certain acticle is one yard long, or that it weighs 
one pound, we mean that it is as long or weighs 
as much as any other article of the same length and 
weight ; and the standard units of weights and 
measures designate to our minds what these con- 
forming weights and measures must be. It would be 
as logical to say that a yard of silk is worth a yard 



98 The True Function of Money 

measure, or that a pound of diamonds is worth a 
pound weight. This language would not change 
the fact that when we say this, we mean that the 
silk is as long as any other piece of cloth that is 
one yard in length, and that the diamonds weigh 
the same as any other commodity which weighs 
one pound. The standard units of weights and 
measures are used only as a means of comparing 
these commodities : a sort of medium of exchange 
of their comparative units. The true function of 
dollars, in their particular sphere, is the sam.e as the 
units of weights and measures, being a fixed stand- 
ard for purposes of comparison only ; and none of 
them can by any construction ever become the com- 
modities with which they deal. 

If the market conditions are such that wheat 
is rated as worth one dollar per bushel, oats worth 
one dollar per bushel, and hay worth twenty dollars 
per ton, it means that one bushel of wheat will make 
an even exchange for one bushel of oats, and that 
it will take twenty bushels of either to exchange for 
a ton of hay. If wheat goes to one and one-half 
dollars per bushel, it means that it would take one 
and one-half bushels of oats to make an even ex- 
change for one bushel of wheat. Money figures in all 
these transactions as an abstruse reckoner of the 
differing values of commodities. Having no connec- 
tion with the real values of commodities, it matters 
not, in the first instance, what the amount of money 
upon which it is based may be ; but this relative 
status between money and commo'dities, when once 
established, is of the utmost importance to pre- 



The Money Question 99 

serve ; and it is equally important, and an indi- 
spensable requisite, that the amount of money in cir- 
culation be maintained at that point, or as near 
thereto as possible. Maintaining this fixed and stable 
amount of money in free circulation is as vital to 
the business interests as is the normal flow of blood 
in a living body. If you increase the flow beyond 
normal, it develops one set of maladies ; if you de- 
crease the flow, others appear. The maintaining of 
this equilibrium is mandatory. The slightest change 
either way produces like results. Thus, if the ratio 
of the money units to the units of commodities be- 
comes fixed and settled upon the basis of a certain 
amount of money in circulation, and that ratio 
should happen to be. at any given stage of the market, 
that one bushel of wheat is equal to one dollar, we 
imperceptibly slip away from the true relation, 
as will be hereafter explained, and we accept as a 
fact that the bushel is worth one dollar, and, in- 
versely, that the dollar is worth one bushel. This 
being true, we can readily see how an inflation or 
a contraction of the money in circulation will 
afifect the matter. If an inflation to twice the amount 
of money in circulation occurs, it will result in the 
proportion of one bushel of wheat to two dollars, 
thereby lessening the purchasing power of the dollars. 
If the money is contracted to one-half of the former 
amount, then the ratio will be one bushel of wheat 
to one-half dollar, thereby increasing the purchasing- 
power of the dollar. This arbitrarily destroys the 
stability of the unit of the measure of value, thereby 
invalidating its usefulness. 



100 The True Function of Money 

I wish my reader to get his mind firmly fixed 
upon this fact — that is, that the inflation or con- 
traction of the currency in no way affects the rela- 
tive status of commodities. Their relative propor- 
tions as to quantity and value are always the same, 
subject to the fluctuations caused by the law of supply 
and demand. Commodities, as between themselves, 
take no reckoning of the greater or lesser purchasing 
power of the dollar ; — thus, as far as commodities are 
concerned, if the money is inflated to twice its 
former value, and the proportion then reads that 
one bushel of wheat is equal to two dollars, it also 
means that if oats were formerly worth one dollar, 
they are now worth two dollars per bushel. As to 
the wheat and oats, the proportion remains the same 
— that is. that one bushel of wheat is still worth one 
bushel of oats. If the currency is contracted to 
one-half its former volume, and the proportion is 
that one bushel of wheat equals one-half dollar, this 
also means that one bushel of oats, which was for- 
merly equal to one dollar, is now equal to one-half 
dollar. We find no change in the proportion of 
wheat to oats; they still equal each other. 

Just as we get to understand that the owners of 
the commodities of the world are not aitected in 
any way, in their relative standing to each other, 
by a change in the volume of currency, we are con- 
fronted with this problem: If I have ten thousand 
bushels of wheat, which have, by the settled ratio 
of commodities to money, been ascertained to be one 
bushel to one dollar, and I sell at that price, I have 
simply exchanged my wheat for other commodities — 



The Money Question 101 

say, oats at one dollar per bushel, for future de- 
livery. I accept an order on the world's stock of oats 
in the form of money which now bears the ratio 
of one 'dollar to the bushel. It is evident that if this 
ratio is changed before I elect to surrender my 
order and take the goods, I will be affected by the 
change ; thus, if the money is inflated so that the 
ratio will at that time be one bushel of oats to two 
dollars, I will be able to get but five thousand 
bushels. If, on the other hand, the currency is 
contracted and the ratio becomes one bushel of oats 
to one-half dollar, then I will be able to get twenty 
thousand bushels with my money. All this goes to 
show, that, while a man's possessions are in the 
form of commodities, he is not concerned with the 
volume of money in circulation, as his commodities 
will always maintain a uniformly relative value to all 
other commodities. It is not till he exchanges his 
commodities for money that the change in the volume 
thereof in circulation becomes vital. 

It is thus evident that one who is honestly 
using his money in business should be protected 
in this transition from wealth to the evidence thereof. 
The money in circulation must be kept at a stable 
quantity. Any sudden change therein disorganizes 
the whole system. The fact that the law compels a 
man to do business with the adopted medium of 
exchange, and to accept from his debtors and to give 
to his creditors legal tender, in the general course 
of business, causes a constant transition of com- 
modities to money and of money back to commodities. 
This being true, no one should be compelled to 



102 The True Function of Money 

suffer loss, or permitted to gain a profit, in these 
transactions by any arbitrary or personally con- 
ducted expansion or contraction of the volume of 
money in circulation. 

We are now on the gold standard, and for the 
purpose of this investigation we will admit that this 
best conserves the stable parity between money and 
commodities, so important to maintain; and that the 
production of gold will be sufficient to maintain 
that parity with the increasing wealth of the world. 
Nothwithstanding the fact that our monetary system 
is thus theoretically perfect, we still have a vivid 
conviction that something is wrong. The same old 
malady keeps continually breaking out. Of the two 
evils of inflation and contraction, the former is by 
far the lesser. It is an error on the side of the weak 
against the strong; it is "to err on the side of mercy," 
as it were. The results therefrom do not, and can- 
not, cause such wide-spread misery. This impels us 
to the conclusion that the seat of this malady is to 
be found in the realm of contraction. To become 
convinced that it is the periodic contraction of the 
currency which causes our industrial troubles, one 
has but to observe the actual workings of the system. 
I take it as a fact beyond doubt that every dollar 
of our money is now bearing interest, many times 
over, to the banking system. By this process, it 
develops that whatever money there is in circulation 
is there by leave of the money-lenders and bankers. 
Business is dependent upon the amount of money 
thus permitted to circulate. 

This being true, we will watch actual results. 



The Money Question 103 

We have noted that the first symptom or indication of 
the breaking-out of the malady is a stringency of 
money. On all sides we hear the complaint that 
"money is tight." This complaint is well founded ; 
money is tight and scarce. It is being taken out of 
circulation by the controllers thereof. This is easily 
accomplished ; upon the receipt of a telegram from 
headquarters every bank throughout the country 
joins with Wall Street in calling in all outstanding 
obligations and refusing to make further loans. It 
is in the power of the controllers of this money to 
decrease in one day the amount in circulation to the 
checking accounts and the change in our pockets. 
This, of course, does not take into consideration 
money in safe-deposit vaults, which is not in circula- 
tion anyway. We would then have a contraction of 
the currency sufificient to put the purchasing power 
of a dollar as high as that of a thousand-dollar 
bill when things are normal. This, however, would 
bring certain disaster ; so the same idea is carried 
out, but with dignified judgment. The currency is 
periodically contracted far enough to milk or squeeze 
business to the breaking point, when all of a sudden 
the pressure is relieved, money is turned loose via 
the loaning route, and we begin to feel the return 
of prosperity throughout the land. It will not avail 
our money-lending brethren to deny that they do this. 
Everyone who has had dealings with the banks has 
witnessed this mysterious and ever-recurrent practice 
of refusing loans and calling in all outstanding ob- 
ligations. 

We the people, as a whole, in our ignorance 



104 The True Function of Money 

of the true condition of affairs, look upon these dis- 
turbances as a thing of course, much the same as the 
ancients considered all calamities to be a visitation 
upon them, manifesting God's displeasure. When 
prosperity returns, we think that God has relented. 
Little we know that this prosperity is the placing 
of loaned dollars where they will do the most good 
in preparing the crop of milk and honey to be har- 
vested on the next milking and squeezing raid. 
This legalized injustice is the direct result of per- 
mitting money, in the hands of private individuals, 
to be guaranteed against loss and assured of interest. 
This is a most dangerous power acquired through 
the erroneous conception that money is capital. In 
everyday life, we look with disfavor upon the practice 
of keeping two scales on hand — one for buying 
and the other for selling ; one inflated and the other 
contracted. And yet the controllers of our money 
are operating upon the very same principle. They 
deal with the world's wealth with either an inflated 
or contracted currency ; the one a buying scale, the 
other a selling scale, to be used alternately as best 
serves their purpose. In permitting money to become 
centralized by the unfounded notion that it is capital, 
and thus entitled to earn, we put into the hands of 
those who hoard the money the power to inflate or to 
contract at will the volume of money in circulation. 
This automatically "bulls" or "bears" the fruit of 
our labor so as to suit the avarice and designs of the 
controllers of the currency. 

During the greenback and free-silver campaigns, 
all the facts and logic bearing upon the evils of 



The Money Question 105 

inflation were marshalled and launched in solid 
phalanx by the votaries of the doctrine of sound 
money, with convincing and irresistible effect. The 
people rallied to the banner of this logic and, by their 
votes, put an effectual quietus on that grim-visaged 
destroyer, Inflation. By so doing, the people placed 
a secure barrier against any hope of their ever 
gaining any unjust profit from the commodities, 
the products of labor, in their hands. Inflation is 
unscientific and unjust ; it works an advantage 
to commodities and an injustice to money. Contrac- 
tion, equally unscientific and unjust, works an ad- 
vantage to money and an injustice to commodities. 
The people's interest lies naturally with commodities; 
the interests of the banks and money-lenders lie 
wholly in the realm of money. 

Following a perfectly sane and logical course, 
the people, by their votes, erecte'd an effectual barri- 
cade and are therefore fortified against the dangerous 
inflation of the volume of money in circulation. 
The torrents of greenbacks and free silver may now 
beat against this barricade, but their efforts will be 
unavailing. With a sublime confidence, the people 
rest assured that the money in circulation will thus 
be maintained at a constant and uniform level. They 
trustingly believe that with such protection it will 
and must remain normal ; and that any theory to 
the contrary must, in the very nature of things, 
be baseless. With a consolation due from a great 
deed w^ell done, the people now apply themselves 
to the task of producing wealth — commodities — and 
bringing them into a normal market. They learn 



106 The True Function of Money 

in time, however, that the volume of money available 
to carry on business has a most mysterious and dis- 
tressing habit of contracting at the very worst time 
that such a thing could happen. Evidently, the medium 
of exchange leaks off into the banks, and is held 
there. The people, in their zeal to guard against an 
over-supply of the medium of exchange, lost sight of 
the disastrous consequences of subterranean chan- 
nels leading into the banks. They had not detected 
the great distinction between the volume of money in 
existence and the volume of money in circulation. 
The more the medium leaks off into the banks, 
the more precious it becomes, and the greater the 
havoc wrought upon the producer and the consumer. 
These periodic leaks into the banks so deplete the 
volume of the medium of exchange, in circulation, 
that the commodities become stranded upon the 
shoals of bankruptcy. The consumer wants the 
goods and cannot get them ; the producer wants to 
move the goods and cannot do so. They both suffer. 
In the meantime the banker and money-lender 
are enjoying a high grade of prosperity. What the 
first lose inures to the latter's gain. This is evident. 
The same mathematical demonstration, elsewhere 
herein, which shows how one hundred thousand 
dollars, with fifteen per cent reserve, will permit 
the use of five hundred and sixty-six thousand, 
six hundred and sixty-six dollars and sixty-six cents 
of credit ; and on a five per cent reserve will permit one 
million nine hundred thousand dollars of credit to be 
utilized, will, when inversely reasoned, also demon- 
strate that one hundred thousand dollars taken out of 



The Money Question 107 

circulation will, in the same way, render the same 
amount of credit, respectively, unavailable. This stifles 
a commensurate amount of exchange. 

The above statement is based upon the amount 
of credit made available to tTie immediate borrower, 
only, and takes no note of the millions of dollars- 
worth of credit which the above sum would make 
available to others, provided it could be kept out 
of the banks and in constant circulation. A homely 
example will illustrate : A, B, C, D, E, F, and G, and 
as many more as you may wish, have been engaged in 
business and have become mutually indebted. A 
has been successful in borrowing ten dollars from 
a bank and pays it to B, he to C, he to D, and so 
on 'to G, who pays it back to A. By going no further 
we have balanced seventy dollars-worth of accounts. 
It could go on indefiinitely. Or : Assume this 
money to be used in its legitimate capacity — that is, 
invested in commodities, — and we have the following 
condition : A will buy a commodity from B, and 
he from C, and so on ; there is no limit to the 
amount of commerce which could thus be carried on. 
Locking up the ten dollars and hoarding it will 
make all this potential business impossible. 

If civilization understands any one fact, it is 
that business cannot be carried on without money. 
No matter how much money may be in existence, 
if it is all withdrawn from use and locked up it 
has for that period as money ceased to exist, and 
industry is the sufferer. 

The next task confronting the people is the 
proposition of stopping the leakage into the banks. 



108 The True Function of Money 

This is as simple as was the building of the barri- 
cade against inflation. They are each done by the 
will of the people, and evidenced by a few drops of 
ink on a statute-book. We are already secure against 
inflation ; we must now secure ourselves against 
contraction. We experience no danger from flood; 
but we must by all means stop the leaks. The same 
facts and logic which were so successfully urged 
against inflation apply with equal force to that 
greater evil which results from contraction, — of the 
two evils, contraction is by far the more disastrous to 
commerce ; and today we have no protection what- 
ever against it. This engine of destruction is com- 
pletely in the hands of the bankers and money- 
lenders, and they are answerable to no one. At will, 
"upon the mellowing of occasion" these gentlemen 
can, and do, demoralize business by the simple act 
of contracting the amount of money in circulation, 
which they do by calling in loans as fast as they 
become due and refusing to make new ones — a pro- 
ceeding which causes the heart-rending miseries of 
poverty to stalk, gaunt-eyed, through homes wdiere 
peace and plenty should be the rewards of honest 
labor. This condition places all business upon the 
insecure ground of human weakness swayed by 
avarice. At any moment, structures which have 
taken years of toil and application to erect may 
be torn from their foundations and left smoldering 
wrecks, monuments by the wayside, to mark the 
graves of martyrs to that erroneous idea that money 
is capital, and, as such, has the right to profit — and, 
more, to have that profit guaranteed. 



The Money Question 109 

History periodically devotes a chapter to the 
full verification of the foregoing facts. Let us read 
an appropriate chapter on the English panic of 1847 : 

"In modern England, as in ancient Italy, the 
weakest sank first, and the lan\led gentry suc- 
cumbed, almost without resistance, to the combina- 
tion which Lombard Street made against them. 
Yet, though the manufacturers seemed to triumph, 
their exultation was short, for the fate impended 
over them, even in the hour of their victory, which 
always overhangs the debtor when the currency 
has been seized by the creditor class. By the 'Bank 
Act' the usurers became supreme, and in 1846 the 
potato crop failed even more completely than in 
1845. Credit always is more sensitive in England 
than in France, because it rests upon a narrower 
basis, and at that moment it happened to be strained 
by excessive railway loans. With free trade in 
corn, large imports of wheat were made, which were 
paid for with gold. A drain set in upon the banks, 
the reserve was depleted, and by October 2, 1847, 
the directors denied all further advances. Within 
three years of the passage of his statute, the event 
Loyd had foreseen arrived. 'Monetary distress' 
began to force down prices. The decision of the 
directors to refuse discounts created 'a great excite- 
ment in the stock exchange. The town and country 
bankers hastened to sell their public securities, to 
convert them into money. The diflference between the 
prices of consols for ready money and for the account 
of the 14th of October (only twelve days oflF), 
showed a rate of interest equivalent to 50 per cent 



110 The True Function of Money 

per annum. Exchequer bills were sold at 35s. dis- 
count.' * * * 'A complete cessation of private dis- 
counts followed. No one would part with the money 
or notes in his possession. The most exorbitant 
sums were offered to and refused by merchants for 
their acceptances.' 

"Additional gold could only be looked for from 
abroad, and as a considerable time must elapse be- 
fore specie could arrive in sufficient quantity to give 
relief ; the currency actually in use offered the only 
means of obtaining legal tender for the payment of 
debts. Consequently hoarding became general, and, 
as the chancellor of the exchequer afterward ob- 
served, *an amount of circulation which, under or- 
dinary circumstances, would have been adequate, 
became insufficient for the wants of the community.' 
Boxes of gold and bank-notes in 'thousands and 
tens of thousands of pounds' were 'deposited with 
bankers.' 'The merchants,' the chancellor said, begged 
for notes : 'Let us have notes — we don't care what 
the rate of interest is. Only tell us we can get 
them, and this will at once restore confidence.' 

"But, after October 2, no notes were to be had, 
money was a commodity without price, and had 
the policy of the 'Bank Act' been rigorously main- 
tained, English debtors, whose obligations then ma- 
tured, must have forfeited their property, since 
credit had ceased to exist and currency could not 
be obtained wherewith to redeem their pledges. 

"The instinct of the usurer has, however, never 
been to ruin suddenly the community in which he has 
lived : only by degrees does he exhaust human vital- 



The Money Question 111 

ity. Therefore, when the great capitalists had satis- 
fied their appetites, they gave relief. From the 2d 
to the 25th of October, contraction was allowed to 
do its work ; then Overstone intervened, the govern- 
ment was instructed to suspend the 'act', and the 
community was promised all the currency it might 
require. 

"The effect was instantaneous. The letter from 
the cabinet, signed by Lord Russell, which recom- 
mended the directors of the bank to increase their 
discounts, 'was made public about one o'clock on 
Monday, the 25th, and no sooner was it done so than 
the panic vanished like a dream ! Mr. Gurney 
stated that it produced its effect in ten minutes ! 
No sooner was it known that notes might be had, 
than the want of them ceased !' Large parcels of 
notes were 'returned to the Bank of England cut 
into halves, as they had been sent down into the 
country.' The story of this crisis demonstrates 
that, by 1844, the money-lenders had become auto- 
cratic in London * * * 

"There was extreme suffering throughout the 
country, which manifested itself in all the well-known 
ways. The revenue fell off, emigration increased, 
wheat brought but about five shillings the bushel, 
while in England and Wales alone there were upward 
of nine hundred thousand paupers. Discontent took 
the form of Chartism, and a revolution seemed 
imminent." — Law of Civilization and Decay, pages 
342-345, — By Brooks Adams. 

From this chapter certain facts stand out in 
bold relief : 



112 The True Function of Money 

1st. "By the 'Bank Act' the usurers became 
supreme." 

2nd. "A drain set in upon the banks." 
3d. "The directors denied all further advances." 
4th. "The decision of the directors to refuse 
discounts created a great excitement in the stock 
exchange. The town and country bankers hastened 
to sell their public securities, to convert them into 
money." 

5th. "A complete cessation of private discounts 
followed." 

6th. "Hoarding became general." 
7th. "The merchants begged for notes." 
8th. "There was extreme suffering throughout 
the country." 

9th. "When the great capitalists had satisfied 
their appetites they gave relief." 

10th. "The effect was instantaneous." 
We here have the Ten Commandments of all well- 
devised panics; those of 1873, 1893, 1907, and 1921 
were all brought on by a rigid adherence to the 
same formula. 

Gold and silver are the best substances available 
for the standard of our currency. They are suffi- 
ciently stable and convenient, and exist in ample 
quantities for all purposes. The periodical collapse 
of a metallic standard can in no way be attributed 
to the circumstance that it is metallic; for these 
conditions arise solely from the fact that it becomes 
unavailable by reason of the hoarding of it by those 
who assert their assumed right so to do. 



The Money Question 113 

The moment the amount of money available 
for circulation becomes equal to, and as equable as, 
the amount in existence, there will be no fear of 
collapse. But as long as the world accepts the 
doctrine that money is a commodity, subject to 
private ownership and control, the evil of hoarding 
will be present. 



CHAPTER XI 
LAW AND FACTS 

THE SUBJECT of money is disposed of by the 
United States Constitution with extreme brev- 
ity. It is as follows : 

Article 1, Sec. 8. Clause 5: The Congress shall 
have power "to coin money, regulate the value 
thereof, and of foreign coin." 

This provision gives to Congress the exclu- 
sive right to do three things: 1st, To coin money. 
2d, To regulate the value of money. 3d, To regulate 
the value of foreign coin. These three rights are of 
equal importance. The right of Congress to coin 
money, and a denial of that right to the States or 
to individuals, is unquestioned. The right of Con- 
gress to regulate the value of domestic money and 
of foreign coin, and a denial of that right to the 
States or to individuals, is equally beyond question. 

A proper construction of this provision of the 
Constitution turns upon the true meaning of the 
words "regulate the value thereof/' Thus far. Con- 
gress has acted upon the narrow and erroneous 
construction that to regulate the value of money 
means to establish the number of grains of gold in a 
dollar; see U. S. Revised! Statutes, Sec. 3511. If 
establishing the number of grains of gold in a dollar 
regulates the value thereof. Congress could, if given 
like authority, regulate the value of brass by estab- 



Lazf and Facts 115 

lishing the number of ounces of copper it should 
contain to the pound. This would regulate the value 
of brass, and the law of supply and demand could 
be thrown to the discard. Although Congress as- 
sumes that prescribing the number of grains of gold 
in a dollar regulates the value thereof, it seems to 
have realized the impossibility of regulating the 
value of foreign coin in the same way ; so, to its 
mind, the following act would accomplish the de- 
sire'd result : 

Tariff Act of August 27, 1894, ch. 349, Sec. 25 : 
"That the value of foreign coin as expressed in 
the money of account of the United States shall be 
that of the pure metal of such coin of standard 
value * * * Provided, that the Secretary of the Treas- 
ury may order the liquidation of any entry at a differ- 
ent value, whenever satisfactory evidence shall be pro- 
duced to him," etc. 

This Act fixes a value of foreign coin, but 
does not regulate its value. On the contrary, the 
proviso gives to the Secretary of the Treasury the 
power to regulate the value of foreign coin. Al- 
though the Constitution empowers Congress to regu- 
late the value of money. Congress has thus far 
failed to do so. The framers of the Constitution of 
the United States were not so absurd as to assume 
the regulation of a thing not in existence. They 
empowered Congress, first, to coin money; and it is 
this money, after it is coined, which is to have its 
value regulated. The meaning of the term "regulate" 
has repeatedly received judicial construction. 

"A power to regulate certainly implies a con- 



116 The True Function of Money 

tinued existence of the subject matter to be regulated." 
54 Mo. 17-34. 72 Tenn. (4 Lea), 1-13. 

" 'Regulate', as used in the Act of February 15, 
1877, * * * means and includes the power to con- 
trol." 16 Neb., 681. 

" 'Regulate', as used in Gen. Incp. Law, Art. 5, 
Sec. 1, cl. 9, includes control, and hence it authorizes 
a city to control such streets." 115 111., 155. 

"The term 'regulate' ordinarily implies, not 
so much the establishment of a new thing, as the 
arrangement in proper order of such as already 
exist." 26 Fed. Cas., 185-193. 

"I very much doubt if anyone would contend that 
by 'by-law' the legislature meant to grant a power 
to create. — to grant something new and independent 
for the welfare of the city. It certainly impresses 
me most strongly that in this sense a by-law is to be 
understood as the means by which something that 
is already instituted or declared is to be considered. 
It is a pointing out of the method or the steps 
beforehand by which the city authorities shall carry 
out what they have by more solemn ordinance al- 
ready declared should be done. And I think this 
reasoning applies with particular force to the word 
'regulate.' Certainly, the word 'regulate' does not 
mean to create or ordain." 10th Atl., 809-811. N. J. 

Eq. 

The Constitution of the United States uses the 
■w'ord "regulate" in the same sense as above in 
clause 3 of the same Sec. and Article as follows : 
"To regulate commerce with foreign nations, and 
among the several States, and with the Indian 



Law and Facts 117 

tribes," and in almost the same breath gives the 
power to regulate the value of money. Being thus 
used in the same manner and at the same time 
and in the same sense it must be intended to have the 
same meaning. This meaning has been judicially 
determined by the Supreme Court of the United 
States : 

"The power to regulate commerce comprehends 
the control for that purpose, and to the extent 
necessary, of all navigable waters of the United 
States which are accessible from a State other than 
those in w'hich they lie. For this purpose they are 
the public property of the nation, and subject to all 
the requisite legislation by Congress. This neces- 
sarily includes the power to keep them open and 
free from any obstruction to their navigation, inter- 
posed by the States or otherwise ; to remove such 
obstructions when they exist ; and to provide, by 
such sanctions as they may deem proper, against 
the occurrence of the evil and for the punishment of 
the offense." 70 U. S. (3 Wall.) 713-724. 93 U. S. 
9-10. 

Apply the law of the above decisions to money 
in the scope and sense that the court applies it to 
commerce, and the money question would be solved. 

Money is not a commodity — that is, wealth 
produced by individuals for the purpose of barter 
and trade; but it is, however, a governmental factor 
of commerce which, in common with true commodi- 
ties, is subject to the law of supply and demand. No 
one can successfully deny that a supply of money 
in excess of the requirements of exchange means 



118 The True Function of Money 

a money of lesser value, while requirements of ex- 
change in excess of the supply of money mean money 
of greater value. Money is, therefore, directly 
amenable to the law of supply and demand ; and 
whoever regulates the supply of money, that is. 
the amount permitted to circulate at any given time, 
will be the party who regulates the value thereof. 
That money has a very fluctuating value after coinage 
is patent ; and that Congress should regulate this 
value is evident. This it has failed to do. Contrary 
thereto, it delegates this important Constitutional func- 
tion to the bankers and money-lenders, and they 
regulate the value of money at will, and always 
to their own best interests, and with a total disregard 
of the rights and interests of the people. They, 
the bankers and money-lenders, have thus become 
a co-ordinate branch of the government, self-con- 
stituted and answerable to naught but their own 
interests. 

The value of money can be, and is, regulated 
solely by control of the volume in circulation ; and 
this control is, and rightly so, placed in Congress by 
the Constitution. To enforce this right, the govern- 
ment must retain control of the volume of money 
in circulation ; and the method for accomplishing 
this is by the establishment of government banks, 
thereby taking that control out of the hands 
of private individuals. This change would cause 
no confusion whatever. Business would be con- 
ducted in the same manner as at present. The govern- 
ment would make a charge for the use of the money, 
just as the bankers do today ; but this charge would 



Lazv and Facts 119 

not be interest as now understood. It would be an in- 
direct tax upon the people for the purpose of de- 
fraying governmental expenses. This would do 
away with the present army of tax-gatherers and 
provide an even and just levy of taxes in proportion 
to the amount of consumption ; the rich, being 
larger consumers, would justly pay a larger tax 
than their poorer neighbors. 

This tax, levied by the government, would be 
paid back to the people; while under the present 
system the tax is levied by private individuals and 
is to be loaned back only, thus to become a constant 
and consuming debt, and for no value received by the 
people. We are now paying this tax to the banks 
and money-lenders for the privilege of using our 
credit, and we must then pay to the government 
a tax upon the commodity for which we exchanged 
our credit ; thus paying a double tax. The tax thus 
collected by the bankers and money-lenders is far 
in excess of that collected by the government. 

Money is the blood of commerce, and it could 
and would, if unrestricted, circulate through jhe 
industrial body, insuring good health thereto, just 
as that vital fluid maintains equilibrium in a living 
body. Give me the control of the blood in your 
body, and I can tell you to a day when you will be 
very sick; I can also tell you to a day when you 
may become normal ; I can likewise tell you exactly 
what you must do, for me, before I will permit 
you to become normal. My control of the volume of 
blood permitted to flow through your system will 
assuredly regulate the value of that blood to you. 



120 The True Function of Money 

The circumstance that you need that medium, blood, 
in your body, and that the commercial world needs 
that medium, money, in its body, must be evident 
to every thinking mind. 

The fact that Nature has established a substance 
to us known as blood, with so many red and so many 
white corpuscles to a given amount thereof, and the 
fact that Congress has established a substance, to 
us known as money, with so many grains of gold 
and so many grains of silver to a given amount 
thereof, go no further than to fix and establish what 
these two substances are to be. The value of each 
is regulated by the flow. A normal flow of either 
will cause us to place a normal value thereon ; but, 
curtail the flow, and their value is immediately en- 
hanced. All money not in immediate use by a citi- 
zen should be kept on deposit at a government bank. 
This would in no way afifect his credit, as his 
money, or rather credit, will always be at his com- 
mand, when he desires to use it legitimately. No 
one would be the loser by this system. Each would 
have his account at the bank just as he has now, 
and would have that account guaranteed by the full 
faith and credit of the government, which is more 
than he has now. He would have the further satis- 
faction of knowing that no private individual would 
be levying a tax upon him for the use of the govern- 
ment's day-book, for private gain, under the mis- 
taken idea that it was his to do with as he saw fit, 
which is in turn based upon that most violent as- 
sumption that he had earned it. Furthermore, the 
depositor would be assured that no private individual 



Law and Facts 121 

could arbitrarily refuse him the privilege of making 
an entry in said day-book to the full extent of his 
credit. Government control of its guaranties — money — 
and of the tokens thereof, is the only solution of that 
vexed problem of maintaining in circulation a uni- 
form volume of the medium of exchange. Under 
these conditions anyone desiring to borrow money 
would have his credit assessed by a board of ap- 
praisers consisting of local appointees, the apprais- 
ment to be in a fixed ratio to his assessments for 
taxation. Every board of directors of a bank 
is now acting as a self-constituted board of ap- 
praisers, and their decisions are arbitrary and un- 
appealable. Safe-deposit vaults, and exportation of 
money abroad, and all other methods whereby 
money is arbitrarily withdrawn from use by the 
individual, must be outlawed; and all money thus 
manipulated must be forfeited to the government. 
To those whose education and philosophy have 
taught them a profound reverence for their individ- 
ual conceptions of those much misunderstood terms 
"vested rights" and "earning power," this proposition 
will seem untenable. But that question does not enter 
here ; there can be no vested rights in the medium of 
exchange. Even though such a thing could be 
possible, the proposition is still in no way repulsive. 
If a man were to construct a bludgeon, no one could 
deny that he had, a vested right in that bludgeon; 
and if he sallied forth upon the street and by a 
dexterous use of it soon found himself several 
hundred dollars to the good, no one could deny its 
earning power. That the law "ruthlessly infringes" 



122 Tlic True Function of Money 

these rights causes no regrets, save to the owner of 
the bludgeon. "Vested rights" should and will be 
protected as long as they are not used in a manner 
inimical to society, and their "earning power" will 
be approved as long as they give an adequate 
"value received." 

Conceding, for the sake of this argument, that 
a man could have a "vested right" in the law of the 
land — money — and also in the functioning of that law, 
— adequate circulation of money, — we will find him in 
the same relation to society that the man with the 
bludgeon holds ; he uses his "vested right" in a manner 
inimical to society, and gives no "value received" 
to compensate its "earning power." Society is the 
sufferer in each instance. The only distinction is 
that the man with the bludgeon is not in a position 
to do the colossal harm which lies in the power of the 
other ; he can harm only one at a time, and that in 
the dark and at imminent risk of losing his life in the 
attempt ; the other reaches all alike, on the crowded 
thoroughfares and in broad daylight. I state these 
as simple facts and without malice. The brightest 
jewel in the diadem of reason is common sense. 

The idea that the banking business would be a 
disturbing element in politics if operated as a de- 
partment of government is a bugaboo. The record 
of the other departments of government refutes 
any such fears. To say the very least, government 
employees operating the banks would not be in a posi- 
tion to "play favorites" in the slightest degree as 
compared to the powers and practices of the bankers 
under the present system. 



Laii' and Facts 123 

Let us reverse our reasoning and take the Post 
Office out of being a government department and 
place it in the hands of private individuals, with full 
power periodically to increase or to diminish the 
amount of service available as best might serve their 
purpose. Further : Let us endow them with the 
power to refuse to any individual, and at any time, the 
right to use the Post Office and its service, not- 
withstanding his credit is perfect, i. e. he has plenty 
of postage stamps, and vice versa that they can 
grant all these privileges to others, although minus 
credit — postage stamps. And further : Let us 
provide that they can charge any rate of postage 
which the necessities for postal service should im- 
pose upon the community ; in other words, let us 
turn the Post Office department over to an organi- 
zation which would be an exact duplicate of our 
present banking system — and in a short while we 
would all realize that the change was a disastrous 
mistake. 

The distributing of our mail is not half so 
much of a government function as is that of the 
distributing of our medium of commerce. The 
Post Office operated by the government is a splen- 
did success, and it would be a gigantic failure if 
operated by private individuals as our banks now 
are. When operated by private individuals the 
banks are failures in public service ; they would 
be a highly beneficent success if operated by the 
government, and there would be no more danger of 
political corruption than there is now in regard to 



124 The True Function of Money 

the Treasury Department or the Post Office De- 
partment. 

Elliott, in his work on Usury, page 182, says: 
"One cent loaned January 1, A. D. 1, drawing inter- 
est at the rate of 6 per cent compounded annually, 
on January 1. 1895, would amount to $8,497,840,000,- 
000,000.000.000.000,000,000,000.000,000.000.000. (8,- 
497,840,000 decillions of dollars). To pay this in 
gold, 23.10 grains to the dollar, using it in spheres 
of pure gold the size of the earth, would take 610,- 
070,000,000,000,000 spheres of gold to pay the debt." 

If Methusalah at twenty-one years of age had 
loaned one dollar at 6 per cent, compounded yearly, 
that single dollar at the time of his death, nine hun- 
dred and forty-eight years later, would have grown to 
more than '$977,000,000,000,000,000,000,000. (977 
sextillions of dollars). Figures by McCoy, government 
actuary. 

Debts of the government, of States, cities, coun- 
ties, school districts, port districts, improvement 
districts, transportation corporations, all industrial 
corporations, private mortgages and bank loans, 
amount to more than $150,000,000,000; approximately 
$1,500.00 for every man, woman and child in the 
United States. — Figures by Richardson. 

Virtually all this debt has been accumulated 
in the last fifty years, and each individual is pay- 
ing on this sum to the extent of his or her consumption 
of wealth. This sum at 5 per cent, compounded 
yearly, will double in fourteen and two-tenths years. 
In other words, the people in fourteen and two- 
tenths years will have paid cash, as interest, equal to 



Laiv and Fads 125 

the debt and still owe the debt. This money thus 
paid as interest will be re-loaned, thereby increasing 
the debt to three hundred billions of dollars. In the 
succeeding fourteen and two-tenths years, at 5 per 
cent compounded yearly, this debt will become 
six hundred billions of dollars. The entire wealth 
of the United States is, today, approximately $400,- 
000,000,000.— Figures by Crammon'd. 

A farm mortgaged for more than it is worth 
is of no value to the owner. A nation hopelessly 
insolvent is of no value to its citizens. x\ll those 
who so smugly and complacently drift along from 
day to day, convinced of the divine rights of interest- 
bearing debts, may well do some computing with 
the above figures. The answer will be interesting. 
This appalling condition is to be attained by a 
mercenary few. through the use of government 
equipment (public property) for private gain. The 
entire programme is to be "put across" under the 
pretense that money is a commodity ; the while each 
citizen, with a superficial understanding hampered 
with convictions, is to accept this fallacy as a fact. 
No one can deny the astounding accrescent power 
of money under the interest system ; nor its controlling 
power thus amassed. This power now lodges in the 
banking system. The bankers are human beings 
engaged in business for gain. They will, and they 
do, use this power for all there is in it. 

Thus far there is apparently no argument. It 
is not till the question of the right of the banking 
system, as now constituted, to perform the above 
functions is approached, that dissension appears. The 



126 Tlic True Function of Money 

great majority thoughtlessly accept this right as 
established. They assume that money is a commodity, 
a thing to be privately owned, and traded and bar- 
tered at will, like any other commodity. With this 
point fixed in their minds, they have no trouble 
in applying the laws of economics, and they emerge 
from the controversy fully satisfied with their con- 
clusions. The only relief which they visualize is, 
that by a show of righteous indignation, in time 
of stress, the system will be moved to compassion. 

No reform, be it ever so urgent, can be in- 
augurated under our present system. Whatever 
the reform, if it militates against the interests of the 
bankers and money-lenders, it will result in hard 
times. This is not the effect of the reform, as that 
may be of the utmost benefit to the people ; but, 
as a discipline, the bankers and money-lenders, hav- 
ing exhausted every other means to defeat the 
reform, will, when once the reform is in effect, with- 
draw the blood of commerce and arbitrarily create 
hard times. The average citizen, in ignorance of the 
true cause of the catastrophe, will be apt to blame 
the reform, and wish, at the earliest opportunity, 
to return to the old regime. 

No nation can long survive a condition where 
a portion of its people are morally and intellectuall}- 
pauperized by abnormal wealth, and the remainder 
morally and intellectually pauperized by abnormal 
poverty. Greece, Rome, and Poland exemplified this 
fact. The danger of this condition was foreseen 
by Abraham Lincoln. Near the close of the Civil 
War, Mr. Lincoln said : 



Lazv and Facts 127 

" I see in the near future a crisis arising which 
unnerves me and causes me to tremble for the safety 
of my country. The money power of the country 
will endeavor to prolong its reign by working upon 
the prejudices of the people until all the wealth is 
aggregated in a few hands and the Republic is 
destroyed. I feel at this time more anxious for my 
country than even in the midst of war." 



CHAPTER XII 
THE REMEDY 

FIRST ask yourself the question : Why should the 
government be called upon to pay a tax to a few 
private individuals for the privilege of existing 
and functioning? and, why should the producers of 
the world be held to pay a tax to the same individuals 
for the privilege of producing, and also to be sub- 
servient to their every whim and caprice? That there 
is no valid reason for this condition is evident. The 
following remedy will cure this evil : 

1st. Dispel the idea that money is a commodity, 
and as such subject to private ownership and 
control. The abandonment of this idea will auto- 
matically terminate hoarding by private individuals 
who withdraw money from circulation. 

2d. Preserve the present system of banking 
as a department of government, the same as the 
Postal System. 

3d. Operate the banks as usual, both for de- 
posit and circulation ; the government to charge for 
the use of the money a tax sufficient to defray all 
government expenses. 

4th. Create in the banking department a Bureau 
of Assessment which will, by means of local boards, 
assess the credit of each individual or concern de- 
siring or using bank credit; the assessment to be 



The Remedy 129 

conducted and levied the same as assessments in the 
present plan of taxation, and as just and uniform. 

5th. Organize an Equalization Board whose 
decisions will be appealable to a properly constituted 
court. 

6th. Provide a court of ultimate resort to hear 
and decide appeals. 

7th. Make the concealment of money in safe- 
deposits, or otherwise, punishable. 

8th. Make the loaning of money by private 
individuals, for gain, punishable. 



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